Corporations

TLAW 202: Corporations Law

Question 1

The above case deals with expansion terms of a fisher man of the New South Wales and its related aspects. As per the above case, Bob Beech is a scallop fisherman and he is involved in commercial scallop fishing in the coastal water of Jervis Bay in New South Wales.

There are certain restrictions which are to be considered, the scallop fishing and Marketing Act provides for a quota system. As per this system a person must apply for a quota which will permit him or her to catch 50 tonnes of scallops in a calendar year.

It is an offence to sell the scallops to any other person other than the Scallop Marketing Authority and also a person cannot exceed the quota limit. According to the case, Alice, daughter of Bob advised her to incorporate a company so that he can make his catch double as he can catch more than 50 tonnes.

There are many benefits of incorporating such as growth, unlimited life cycle, better opportunities, transferability of the share, etc. There is also another advantage of incorporated company that one can bypass the legal obligations.

On the other hand, it is also very easy to transfer the ownership to others so that one can make sure the maximum life of the company. Incorporation also help the owner i.e. Bob Beech to cut down the tax rate that they are obliged to pay to the government.

These various benefits will help Bob to bypass the legal criteria developed by the Scallop Marketing Authority. When Bob will incorporate own company, it will become easy for him to include number of shareholders and will become able to hire the existing fisherman  as his own employees from the Jervis Bay in New South Wales.

These criteria will be helpful as now Bob will not be obliged to surpass the rules or regulations that have been imposed to handle or maintain the balance of scallop regeneration process. At the same time, this will help Bob to catch more quantity of scallop as he will not be alone in this, he will be having an entire business entity along with him.

In relation to this case, the Corporations Act 2001 also states that a company may exist after registration. In Australia, it is possible to form a company by only one participant by having limited shares or guarantee. The company can get Australian Company Number (ACN) after registration and an entity can do business after registration (Welch et al., 2016).

Apart from this, the Department of Fair Trading in New South Wales governs the list of business names under the Business Names Act 2002 (NSW). The section 124(1) of the Corporations act provides the power and legal capacity to the company.

Therefore, Bob can start a company and make more profits (Manesh, 2009). On the other hand, Bob can also appoint an underwater diver that will help to increase the number of scallops been obtained as the department of fisheries of Australia have given the permission to five divers to catch scallops going underwater.

Exporting the scallops can also result in providing an extreme beneficial advantage to bob as the scallops are found in limited regions. So, exporting the scallops will also help Bob to increase its business and will also on the other hand double his initial investment (Allen & Kraakman, 2016).

Getting incorporation will also help Bob in a way that he will be no longer limited to sell the scallops been obtained to the Scallop Marketing Authority.

Thus, from the above case it is clearly depicted that Alice’s suggestion given to his father is correct and beneficial for Bob. This incorporation company will help to provide many opportunities for job in the near future.

At the same time, Bob should also make sure that his business entity is not endangering the existence of the species. Along with this, Bob should also see that he has enough money to set up his business entity (Kershaw, 2012).

He should also see to it that his efforts are going out in a positive way and he should try to increase his stock for future benefit as well as continue the process of catching scallops effectively without offending anyone or breaking any legal rules or restrictions.

Question 2

Nuclear Blast Sounds Pty Ltd is one of the wholly owned subsidiaries of New Nirvana Ltd that sets up and runs the band’s concerts. At an N/N concert in Sydney, this subsidiary was negligent in setting the sounds level too high that caused permanent hearing loss to the five audience members.

For these members, the subsidiary had no negligence insurance and did not pay the likely damages claims. In relation to this case, different laws named as the Protection of the Environment Operations Act, 1997 and the Protection of the Environment Operations (Noise Control) Regulation, 2008 and Negligence Act can be considerable to determine the liability of the company for the damages to the audience members.

The Protection of the Environment Operations Act, 1997 and the Protection of the Environment Operations (Noise Control) Regulation, 2008 provide legal framework for the management of the unacceptable noise.

Negligence act also advocates that it is legal duty of the firm to avoid any negligence of the legal obligations and duties and corporate governance at subsidiary level.

It will be needed for the court to decide whether the company and its subsidiary are liable in negligence or not (Chan, 2017). According to this act, negligence is the failure to do an act with the reasonable care to protect others from injury, death and property damage.

A business owner is liable for negligently failing to take care that leads to injury to the customer.In order to decide the liability of the company, it is required to prove the following aspects of negligence:

Duty of care: There should be a relationship between the parties and due to this relationship, a duty of care arises when the law recognizes a relationship between two parties and due to this relationship, one party has a legal obligation to act in a certain way toward the other. In concern of this element of negligence act, it can be stated that Nuclear Blast Sounds Pty Ltd had duty of care due to having a legal obligation to care the audience while setting the sound level.

Breach: The second element of negligence is a breach of duty of care. If someone breaches the duty of care by not acting with reasonable care in fulfilling the duty, then he/she is liable for the damage. In concern of the case, it is clear that the company breached the duty of care and set the sound level above the desirable level (Cheeseman & Garvey, 2014).

Causation: There should be the legal cause of the injury to the entity. From the case, it is evident that the risk of injury to ears of audience members could be avoided by instructing the workers to handle the sound system appropriately. There was a noticeable risk of injury to the audience members in the absence of proper instruction in proper handling of sound system.

The workers of the company breached their duty to take reasonable care for the audience safety that caused injury to them.

Damages: In relation to the breach of duty of care and injury to the entity, the injured person should be remedied by money damages. This law allows the plaintiff to get compensation for the damages and loss caused by the defendant. For the given case, liability is, therefore, established.

The company was negligent in maintaining the permissible sound levels during concert as the company is liable for the reason of injury and permanent loss of hearing to the members.

The company should provide insurance and compensation for the physical damages to the five audience members (Mallor et al., 2012). The consideration of negligence law makes the parent firm liable for the wrong deeds of the subsidiary. It is because the subsidiary showed the careless behavior that resulted in the injury to the audience members.

It was duty of the company to ensure the safety of the audience while running the concert as it violated the duty to keep the sounds level at appropriate level.

Question 3

From the case, it is clear that Millennium Pty Ltd, a project management company was set up by Simon, Michael and Don. The constitution of the firm appointed Don as solicitor for the company, who was responsible for purchasing and selling the land.

The articles provided the need to solve any disputes between company and its members through an arbitrator before nay court proceedings. But after some years, Simon and Michael appointed another solicitor who was more efficient than Don according to their opinion. In relation this concern, Don brought a legal action against Millennium Pty Ltd over the matter.

In order to decide the legal position of involved parties, it is required to decide the validity of the arbitration clause in the articles of the company. Under the Corporation law S33 (1) CA 2006, there is a contractual effect to the constitution of the company.

According to this law, the provisions of the constitution of the company bind the firm and its members if they have agreements on the part of firm and its members to examine those provisions (Resnik, 2014).

The constitution of the firm includes its articles and resolutions that bind the shareholders without their permission. In relation to this, there is no issue behind the inclusion of an arbitration clause in the articles of the firm as there is need to refer the arbitration if any disputes arise (Mallor et al., 2012).

At the same time, article 49 CA states that dispute between the company and members should go to arbitration before court.  This clause also binds each member to observe the constitution and also binds to each other.

Inclusion of the articles of an agreement between shareholders allows for arbitrating any dispute among them. In partnership business, the arbitration agreements are more important to handle disputes between company and its members.

In the given case, it is evident that there was an arbitration clause in the articles of the company as Don cannot bring a legal action against Millennium Pty Ltd over the matter because it is the matter to referral the dispute to the arbitration.

Supporting to this fact, the case of Hickman v. Kent or Romney Marsh Sheepbreeders’ Association was related to a clause in the articles regarding disputes referral to arbitration.

Mr Hickman started proceedings in the High court. But the Court considered the Companies Act 2006 section 33 and denied for court proceedings and declared that Mr Hickman should bound to the referral of dispute to the arbitration.

At the same time, it is also needed to communicate the clause to the members who are invited to join the company (Liu & Shan, 2015).

In the case of Eley v. Positive Life, there was a clause in the company’s articles which stated a certain Mr Eley would be the solicitor of the firm for life. But the court denied for this because this promise would not have been conveyed to the members who were invited to join the company.

In relation to the given case, the clause regarding the arbitration for any dispute was given in the articles and constitution of the company.  It means Don cannot be allowed for legal proceedings because this matter should be referred to the arbitration rather than to the court.

Apart from this, it can also be stated that it was communicated to the other members of the company that Don will be a solicitor for any land purchase and sales made by the company.  So, Don can enforce the clause to the arbitration rather than legal proceedings (Allen, 2014).

In relation to this, Don can precede a warning letter to the firm before making any legal proceedings. Therefore, Don should consider the company’s constitution and bring the dispute to the arbitrator before court proceedings.

References

Allen, C. H. (2014) Bylaws mandating arbitration of stockholder disputes. Del. J. Corp. L., 39, p.751.

Allen, W. T., & Kraakman, R. (2016) Commentaries and cases on the law of business organization. UK: Wolters Kluwer law & business.

Chan, G. K. Y. (2017) Finding common law duty of care from statutory duties: All within the anns framework. Tort Law Review, 24, p.14.

Cheeseman, H. R., & Garvey, J. R. (2014) Business law. USA: Pearson.

Kershaw, D., (2012) Company law in context: text and materials. UK: Oxford University Press.

Liu, Q.  & Shan, W. (2015) China and International Commercial Dispute Resolution. UK: BRILL.

Mallor, J., Barnes, A. J., Bowers, L. T., & Langvardt, A. (2012) Business law. USA: McGraw-Hill Higher Education.

Manesh, M., (2009) Legal Asymmetry and the End of Corporate Law. Del. J. Corp. L.34, p.465.

Resnik, J. (2014) Diffusing Disputes: The Public in the Private of Arbitration, the Private in Courts, and the Erasure of Rights. Yale LJ, 124, p.2804.

Welch, E.P., Saunders, R.S., Land, A.L., Turezyn, A.J. and Voss, J.C., (2016) Folk on the Delaware General Corporation Law: Fundamentals. UK: Wolters Kluwer Law & Business.

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