Law of Business Organisations - Assignment Example

Question Issue The situation with Alvarez and Jara can provide Alvarez with a defense against the DCS Company based on terms and definitions within the law. The main problem that is in question is whether Alvarez and his company can be held responsible for Jara’s actions. Specifically, the two were working under joint ownership of a company, with both under the contractual terms of DCS. The question is whether DCS has the right to sue Alvarez and his company over the robbery that occurred, specifically because Jara and Alvarez where joint owners in the company. Law The law states that a joint venture or partnership has specific applications when actions are taken. According to the QLD Partnership Act of 1891, there is a nature to partnership agreements that only holds partners accountable and liable for specific actions that are under the terms of agreement for a contract. According to Section 3 (1-15), liability issues of the business become questionable. Liability can be defined by the extent to which each individual is responsible for the other as well as through partner’s who breach the trust of other partners. According to section 23A, the liability not only includes basic actions and agreements, but also property and monetary value. Unless all property and money is acquired through business agreements, it is not a liability of the company. The rules to interest and duties of partners in section 27 also apply, which states that there is not a business agreement under the definition of a joint partnership unless each holds equal earnings within that agreement (Partnership Act 1891, 13-26, 2009). Application The first part to this is based on the term of partnership. Even though Jara and Alvarez are partners, Alvarez was not aware of the robbery or the deal that Jara had made with the robber. Under the terms of partnership, there is a joint ownership. However, this doesn’t mean that Alvarez or Jara is responsible for what the other owner does or does not do in terms of the partnership. Even though Alvarez and Jara are partners, Alvarez is not responsible for the actions that are taken by one of the members. This first defense doesn’t leave the company or Alvarez responsible for Jara’s actions. Unless he was involved in the act or had a joint agreement with the security used, he can’t be sued for his partners’ actions. Under section 3 (1-15), the definition of joint ownership does not include being responsible for individual actions. The second concept that applies under the partnership is based on the joint holdings within the company. There is evidence that Alvarez is not responsible for the deal made with the robber because of the following actions after the robbery. Under section 23A, a business is not liable for individual holdings or monetary benefits within a company. When Jara is paid, he immediately leaves to a remote island and spends the $100,000 on a piece of property. The proof that the actions taken for the robber are not a part of the joint agreement is seen because of Jara not splitting the profit with Alvarez. Instead, he takes off with all the money and buys the property while disappearing from the business. Because of this, Alvarez can’t be held responsible for the robbery or the agreement that was made with the robber. For the company to be held liable to DCS, Alvarez would have to receive a share of the $100,000 or the property that was bought away from home. The other application to the joint venture is seen through the concept of engaging in a business deal. It can be assumed that the venture between Alvarez and Jara was under a joint agreement and contract to DCS. According to Section 27, the actions taken were outside of this contract and any agreements made with Alvarez. Jara decided to take part in a business contract with a robber as a joint agreement outside of Alvarez’s knowledge. The agreement with the robber can be considered as a contract and a part of business outside of the main business between Alvarez and Jara. This was not a joint agreement under the business and doesn’t make the business liable to the agreement made between Jara and the robber. Under all of the agreements with the robber, there is not a sense of joint liability. More importantly, there isn’t a deal that is made directly with the business and the robber, but instead the agreement is taken as an individual business transaction between Jara and the robber. Alvarez can then not be held responsible for the robbery that has occurred through the business security that he has provided. The liability that the business is not responsible for continues with the concept of private profits. The $100,000 that Jara made was considered a private profit. The business was not notified of what was occurring at the time of the robbery, which has evidence shown from Jara taking all of the money and from Alvarez not knowing what was occurring with the business. Since Jara didn’t hold a level of accountability toward the money that was given, Alvarez can’t create a business connection between what occurred and his business. It can also be noted that Jara was not working underneath the firm, but instead was working as a competitor in the firm. The duty and the contract by Jara and Alvarez were to provide security for the diamond shop. The accountability and the contract then immediately leads to the assumption that Jara won’t move into another competitive force that would harm the business. When Jara makes the agreement with the robber, it immediately moves into a private profit as well as one that is based on competition against the business. More importantly, Jara doesn’t provide any accountability to Alvarez, but instead leaves with the money. The duty of Jara not to compete and to remain accountable with profits made was broken by Jara. This was not a part of the business with DCS and leaves Alvarez free of any duties that would have broken the contract with DCS. Since Jara took the actions and then left the company, it can also be assumed that he took part in dissolution to the company. His venture was one that was acted on with a private consensus with the robber. When he did this, he immediately left the relationship with Alvarez and took part in a single venture. When he left the company to buy property, it showed a termination of rights to the company and to the joint venture. More importantly, when Jara was caught and imprisoned for 10 years, it immediately ended the relationship that he had as a business with Alvarez. The single undertaking, undefined notice of leaving and the lack of holding to duties within the company immediately terminated Jara’s agreement with the company and stopped the joint partnership from existing. This means that Alvarez and his company can’t be held responsible for what occurred with DCS. More importantly, Jara’s decision to take part in an illegal contract immediately breached the contract of DCS and the company and holds him solely liable for the robbery. Conclusion The actions that Jara took, both before and after the robbery, show him as solely responsible for the robbery that took place. Even though Jara was working with Alvarez under the company name, he took part in what was occurring without the notification or presence of Alvarez. Since he took these specific actions and showed proof through his decision to flee the country and to become a part of the robbery, it doesn’t make the company responsible or liable for what occurred. According to both sections 23 and 27 of the QLD Partnership Act, Alvarez can not be held responsible for the actions of Jara as it immediately breached the contract between DCS and the security company and became an individual action. For Alvarez’s defense, he can state that he is not held liable for the breach of contract and the individual actions taken by Jara. Question 2 Issue The veture of Hendy Pty Limited was used to create a park for the business. Since there was a downturn in their business from drought, they were in need of recovering the finances in an alternative manner. To do this, they required a loan of $40,000 to start the venture. After a given period of time, they failed at their endeavors and had to shut down the park. They are now indebted to the creditors and have a business that is required to shut down. The question for creditors is whether they can recover the $31,000 still owed, specifically because the trust of Hendy Pty Limited still has holdings of $2 million and is able to hold them liable for all assets that are a part of their trust. Law According to the Trusts Act of 1973, sections 29 to 30C, the investments by Hendy Pty are recoverable. The business of Hendy Pty, according to section 22, states that the business had the right to invest in the business through the trust while allowing the trust to review the performance of the business. According to section 25 of the same act, this relates specifically to securities, which states that the investor has the right to take the trustee money in terms of their own belief in the safety and security of the money. The application of RITS furthers this investment by stating that the underlying security is the responsibility of the investor as opposed to the trust fund. According to section 30A, the loss in investment allows the trust to pay back the investment at a percentage or lesser amount than the amount in the trust. The trustees also have the right to sell, liquidate and exchange property to pay back the investment taken (Trusts Act 1973, 22-39, 2010). The Act o f 1973 also has the Amendment Act of 1999, including sections 119-120. The section states that a person has the right to invest from their trust fund. However, the investment has to be validated and a part of the business, venture or agreement of the trust fund (Trusts Act of 1973, 103-104, 2010). The Partnership Act of 1891 also provides provisions that will allow Hendy Pty to pay back the loan. According to this act, sections 95 – 96, the company has to have a voluntary winding up with a chief executive stating that the company no longer functions. According to section 104, this leads to specific assumptions, namely that any debts will be paid through either voluntary or liquidation options. The savings act number 7 of 1891 also applies, which states that equity and common law are applicable to all business agreements. Since there is no continuation of the business, under section 124-131, a claim has to be made and all equity and liabilities should be accounted for by both document and through voluntary information. This makes the business liable for any proceedings that have occurred during the business and after it has closed down (Partnership Act of 1891, 89-91, 2010). Application The amount of debt that is owed through the Hendy Pty Limited from the unsuccessful venture can be recovered through Farm Bank and from trade creditors. Specific legal provisions need to be considered to ensure that the recovery of the $25,000 and $6,000 is effective and provides a legal basis for the money that is collected. According to the Act of 1973, sections 29-30C, all debt can be recovered from the joint venture. The first concept that has to be looked into is the way in which the limited partnership was resolved. A special resolution between the partners needs to be agreed upon. According to the Partnership Act of 1891, section 6, the first stage is to initiate a closing of the business venture. This should be combined with voluntary winding that is occurring, which states that all parties agree that the tourist business can’t continue to operate and that the debt accrued is a part of the loss that is within the business (Partnership Act of 1891, 71-73, 2009). To do this effectively, the assets should be divided up first on a voluntary basis by the two owners. The assets include the farm, which is currently under a trust fund and worth $2 million. This also includes the house, which carries an equity value of $650,000. The assets are furthered by smaller aspects, such as the different components that are on the farm and the assets that are in the home. The voluntary agreement by Henry and Delia can include a portion of any of these assets to pay back the loans that are owed. If there is not a voluntary option for any of the assets that are needed, then a liquidator can be assigned to take the assets deemed necessary so all debts can be recovered. Under this option, a chief executive will appoint someone to liquidate the assets until all or part of the debt is recovered, dependent on what is agreed upon by both the lenders and by the owners of the business. For this to work effectively, the liquidator has to fall under the partnership of the limited partnership. If this is not possible, then the liquidator will be appointed according to the Corporations Act and must be fulfilled within a specific time frame, including all reasonable costs being fulfilled under sections of this act (Partnership Act of 1891, 73, 2009). A concept to keep in mind in terms of the act and the liquidation of assets is based on the amount of recovery due. The overall amount owed is at $31,000, which is not the majority of assets owed by the Hendy Pty Ltd. In this instance, a deal and overall contract should be made on the assets that need to be sacrificed according to the liquidator. According to the Trusts Act of 1973, the amount of assets and trust has to be lower than the total amount due. Since Hendy Pty has a $650,000 home and $2 million in trusts, the full amount can be recovered. If this can’t be approved, then there needs to be a distribution of assets among those that are in the partnership. If there is not voluntary discretion, then the lenders have the right to take Hendy Pty Ltd to court and to retrieve all necessary assets and values through the operation. This is from the basis of the Supreme Court and applies to those who are a part of the overall judgment of how many assets need to be retrieved (Partnership Act of 1891, 71-73, 2009). There are further provisions that can be followed under this same act, all which allow the right distribution of assets to the lenders under the current amount owed. If the chief executive doesn’t announce how many or what assets should be retrieved within a certain deadline, then the amount can be annulled or the liquidation may not occur. There may also be assumptions made. If this occurs, then Hendy Pty Ltd will not owe the complete amount to the lenders or won’t have to recover the complete debt. For instance, if it is assumed that the assets are a specific value and this can be paid back, but it is not, then Hendy Pty Ltd is not completely liable for paying back the full amount (Partnership Act of 1891, 71-75, 2010). Other assumptions that are dealt with include missing the deadline of 7 days or expecting specific with drawings or closings under the limited partnership. Since the main business will still continue but the tourist sector will close, other assumptions may be made which will not make Hendy Pty Ltd fully responsible for paying back the complete amount of assets owed. To change this, it is the responsibility of the corporation to make specific statements and to provide documents over their business structure as well as with the services, registrants and individuals involved in the company. All contracts and documents pertaining to the business have to be made available to ensure that all information is legitimate and that the assets are valid, which will allow for complete recovery of the debt. According to the Trade Act of 1973, the investment made by Hendy Pty was not outside of the powers of the trustees. It was further a part of the underlying security from the trust, specifically because the amount lent to the owners was less than the overall fund. Since this was validated and a part of the trust fund, the loans can be paid back through the trust fund as a part of the securities. More importantly, the assets, which fall under the same trust, can be used to provide security while allowing the trust to recover after debts are paid off. Conclusion The ability to recover debt by Farm Bank and through the trust is still possible. However, to do this, there has to be specific documentation that the complete farm is closing and under what provisions. More importantly, there is the need to claim specific assets and to follow timelines for liquidation. The recovery of the debt should be based on provisions that include a complete understanding that there is withdrawal from the business and that the recovery of the loan can’t be retrieved expect through the assets that are owed to the bank. The value will then begin to be paid back and Hendy Pty Ltd can begin to recover from the lost assets and the change that the business has gone through. According to both the Trade Act of 1973 and the Partnership Act of 1891, all debts can be recovered through the trust and because of the disposal of the partnership venture. References Queensland Parliamentary Council. (2009). “Partnership Act of 1891.” Queensland Parliamentary Council. (2010). “Trusts Act 1973.” Read More