Company and Association Law, Joint Venture - Assignment Example

Company and Association Law Name: Course: Tutor: Date: PART A Question One a. A joint venture can only occur when two parties come together to share risk and expertise. It is a business conglomerate formed to operate for a finite time characterized by partners’ agreement to develop new entity and assets by contributing capital. Under joint venture, the partners have control over the assets, expenses and the proceeds of new entity. In the global business world, joint venture concept has gained popularity as a continued basis for business operations. The concept is distinct from partnership in the sense that the later involves well established relationship. In the case study, RTL v Queen, Linfox Resources Pty Limited, Downer EDI Mining Pty Limited and Thiess Pty Limited are the participants who have teamed up to pursue common objective of undertaking large business operations (Gibson & Fraser, 2009). b. Joint venture is entered into by or between different parties with specific purpose. Agreeing on the name of a joint venture is the initial process of being in business. This process is bounded by the Joint Venture Agreement, where the parties agree on the name of the new entity. In most cases, the new business entity often adopts the names of the partners based on agreement and tastes of the participants. In the case study, the joint participants have adopted Roche Thiess Linfox Joint Venture as the name of the new business entity. For flexibility purposes, the name of the venture is abbreviated as RTL. RTL is the name that will be used in all business undertakings for the finite time. In case of any liability, the name of individual partners will not be referred. The RTL is the one responsible for damages suffered (Gibson & Fraser, 2009). c. Joint venture is formed with various reasons. Firms opt to come together in order to pursue certain objectives. In the realm world, joint ventures are formed in order to avert the negative effects of enlargement of business projects, ever increasing costs of technology and other business operations, share risks particularly in high capital intensive projects, derive benefits of economies of scale, promote larger market access and pool of resources for funding larger projects. Despite the fact that no clear-cut purpose for the formation of the venture, Linfox, Downer and Thiess came together in order to pursue large business operations as evident when it engages mining operations with another Yallourn. From the basics of the case in court, it is explicit that the RTL Joint Venture was formed purposely to undertake large business operations that would not otherwise undertaken by the individual parties (Hanrahan et al, 2009). Question Two Globally, business engagements between different firms have resulted in contractual liabilities. Parties enter into a contractual agreement and are bounded by certain obligations. It is a common trend that damages arises in the course of contractual business dispensation, and this may result in court case. RTL Joint Venture has agreed to undertake mining operations with Yallourn Energy Limited Company. The later company holds the mining rights for a coal mine in Yallourn city. RTL agreed to carry out contract mining in exchange of possession of the mine site. In the quest of mining operations, RTL subcontracted the operations to Silcar. Richard Gauci, one of the employees of Silcar Company, was seriously injured and later died. This matter was taken to court in an attempt to recover the damages suffered by the deceased. According to Occupational Health and Safety Act 2004 of Victoria, the employer owes a safety duty to its employees. Under Sections 21, 23 and 26 of the Act, RTL is alleged to have failed to promote safety of employees in the working environment. The mining site was not favorable hence affected the employee adversely. When the case was first presented in court, RTL (applicants) dismissed the charges on the grounds that they were unsustainable. However, these applications were rejected by the trial judge. The issue of focus in court whether or not the RTL Joint Venture is responsible for damages suffered by Richard Gauci. The judgment of this issue is based on employment nature of the venture and aspects of legal existence. The difficulty arising is ascertaining whether or not RTL is an employer who had full control of the working environment at the relevant time (Hinchy & McDermott, 2009). According to Hinchy and McDermott (2009, p. 123), Occupational Health and Safety Act requires the employer to provide and maintain favorable working environment that guarantees their safety. Deeply, section 21(1) of the Act clarifies that employer owes a safety duty to their employees, and by extent, to employees of the subcontractor who has been hired by the employer. This obligation should be fulfilled provided that the employer in question has full control of the business undertaking and the place of work. By statutory extension as provided in section 21(3) of Occupational Health and Safety Act 2004, RTL owed the extend obligation to provide safety of the employees of the subcontractor (Silcar). As trading partners, Roche Thiess and Linfox failed to fulfill this requirement thus resulting in death of the Richard Gauci (Silcar’s employee), and this gave rise to the court case (Hinchy & McDermott, 2009). Question Three As stated in question two, RTL Joint Venture is an employer hence it owed an extend duty of providing favorable working environment of the employees of the subcontracting company. It has a duty of ensuring that the mining site is free from risks and hazards. In addition, the venture owed to provide safety equipment that would ensure safety of employees of the subcontracting company during mining operations. The employment characteristics attributed to RTL formed the fundamental basis of Crown case. Crown argued that RTL owed a safety duty as imposed by section 21(1) of the act. He agitated that RTL was an employer according to law. Therefore, the employees of Silcar Company deemed to be employees of RTL after subcontracting the mining operations (Hinchy & McDermott, 2009). Therefore, the allegations that RTL owed a safety duty to the employees of the Silcar Company are true. The charges laid against the venture can only be imposed after Crown provided sufficient evidence depicting that RTL was a party to undertake contract of employment. Precisely, Crown holds that Roche, Thiess and Linfox had agreed to undertake mining operations together with Yallourn energy. As RTL Joint Venture, the parties would be treated as a single entity business in order to ascertain full properties regarding the nature of employment offered by the company and the extent of management and control over the mining operations. Consequently, these questions would be used to ascertain the ultimate breach of duty. After determining that RTL Joint Venture was an employer, and that it full control of the mining operations, then the three parties would be liable for the charges and any other allegations associated with the breach of duty. Crown argued that any breach of duty by the joint venture amounts to breach of duty by the partnering firms. As firms trading together, RTL are responsible for the damages suffered by the employee. According to Crown, the threshold allegation made against the venture is true and the court ought to rule it in favor or Queen. In addition, Crown proposes that any failure to honor safety duty owed to employees of the subcontracting company amounts to contravening of the act. Despite this strong premise, Crown’s allegations and arguments were sharply criticized and dismissed by the applicants and their senior counsel (Hinchy & McDermott, 2009). Question Four The senior counsel representing the applicants demanded that Crown provided substantial evidence that RTL was a party to a contract of employment. In most cases, joint venture does not have a legal existence element. It is just a description of a mere undertaking. Roche Thiess Linfox Joint Venture has no separate legal entity from the three companies. This basal proposition influences the judgment of the consequences attributed to wrongs occurring in course of dispensation of business activities as joint undertaking. RTL is just a name hence does not hold any duty of ensuring safety in the working environment. Fundamentally, Crown’s premise lacked a basis in the sense that individual companies had no derivative liability through the joint venture. Unless it is provided sufficiently that each RTL Joint Venture was an employer of two or more persons, then the counts under section 21(1) of the act as alleged by Crown could succeed charges against it. The imposition of the safety duty principle as postulated in section 21 and 23 of the act requires the party being alleged to be employer be proved to a greater extent that it had full control of the of the working environment. According to section 26(2) of the act, the safety duty of a company extends provided that it had actual control over the working environment (Hinchy & McDermott, 2009). In responding to contention of the prosecutor, the defendants capitalized on section 145(1) of Occupational Health and Safety Act. This section affirms that a person is held liable for the duty after being proved guilty. In such situations, the person is taken to be responsible as opposed to referring to the other people comprising of the partnership business. Crown fundamental premise failed after the defendants alleged that the case was handled in bad law. They based their arguments on the fact that Crown proceeded against the joint venture as opposed to officers. As a matter of law, the possibility that the applicants may have been an employer was insufficient hence the case could not proceed to the jury. In order to impose safety duties under section 21 and 23 of the Act, the jury has to get sufficient information that the applicants were employers. However, Crown premise lacked substantial evidence that individual companies were employers. The evidence presented to the prosecutor regarding the control and management of the working environment was limited only to RTL. Therefore, there was no proof that individual companies controlled the working environment (Hinchy & McDermott, 2009). PART B Definition Vicarious liability is a very controversial form of liability since it convicts an individual for the actions of another person that resulted in damages provided that the two are interrelated in one way or another. The traditional law did not recognize this liability with the exception of nuisance. With the changes in the business environment particularly in twentieth century, vicarious liability have attracted the attention of many especially in corporate entities where the employer is held liable for negligent acts of the employees. Vicarious liabilities are far and wide. However, the common one is liability for employers for damages arising from the actions of the employees such as mislabeling of drugs, selling of alcohol to unwarranted people and hiring of the minor workers among others. On the other hand, direct liability refers to legal obligation of an individual arising due to negligent acts that resulted in injuries or damage of properties of another person. This liability is characterized by the fact that it lacks superseding circumstances (Hinchy & McDermott, 2009). Comparison between vicarious and direct liabilities Vicarious and direct liabilities have certain limitations. Fundamentally, there are offences which both liabilities will only apply in specific circumstances. These situations occur both in partnership, trust and other corporate bodies. For instance, a supervisor in a partnership firm or a company is not liable for charges allegations of assault and battery or use of force within the business environment. This is because of the fact that such actions do not constitute part of employment contract. This exception is only applicable in institutions where use of force is necessary. However, this cannot be applied in the business context (Gibson & Fraser, 2009). The protection offered by the statutes of a limited liability partnership against malpractices does not cover claims arising due to partners’ malpractices other than tort i.e. breach of contract. As such, the partners are not held liable for any partnership liabilities that arise due to negligent act of one partner or other person outside the partner’s control. Due its structure, partners in a limited liability partnership are not personally liable for vicarious liabilities provided that they did not participate in their supervision or possessed any knowledge that would avert such happenings. Notably, supervisors or individuals who were responsible for monitoring of the partner at the time of occurrence are jointly liable for damages occurred. Like vicarious liability, direct liability does not bind other partners for charges other than the person who committed the errors. The wrongdoer is responsible for his/her actions (Gibson & Fraser, 2009). The arguments made by the advocates of vicarious and direct liability are similar in one way or another. The advocates have contended that both liabilities enable the employers to be careful and choosy in the management and control of the employees. In the trust corporation, the principals ought to be careful in managing their employees in order to avoid vicarious liabilities. The absence of this liability would result in wrongful acts of the employees. Due inability to prove their authorization, the principals would escape liabilities very easily. Since partners are not liable for damages suffered due to negligence of one of their members, the individual will be held responsible for the liabilities arising due to their actions. Basically, a member of a limited partnership is not individually liable for vicarious liabilities arising from the actions of another partner, employees, representatives or agents especially if the partner did not participate in supervision of the wrong doer. In most cases, partners are liable for their own malpractices and liabilities arising from the actions of the partners they are controlling (Hinchy & McDermott, 2009). In direct liability, an individual partner who acted with negligent is singularly responsible for the damages suffered. By the virtue of the fact that the liabilities of each partner are limited, therefore the damages suffered by the business due to the action of an individual are held liable by the very individual. The business will not ask the rest of the partners to contribute for the compensation of the loss suffered. This concept is also applicable to vicarious liabilities in a partnership business (Hinchy & McDermott, 2009). Differences between direct and vicarious liabilities Vicarious liability is distinct from direct liabilities in various ways. Under direct liability, the defendant may be more than one, each being sued for their actions that led to occurrences of the damages. This scenario is uncommon in vicarious liability i.e. when something bad occurs; the blame is cast on one particular person. In corporate context, the enterprise is bound for the damages occurring due negligent acts of the employees (Hanrahan et al, 2009). Vicarious liabilities are assigned to individual who is related to person who committed the specific crime. As such, in corporate bodies or trust, the supervisors or any other person who was in control of the employee during the occurrence of the damages is responsible for liabilities. The employee who committed the offence is not held liable for the damages. However, the principal should be responsible for the damages occurring due to negligent acts of the employee. Notably, the rest of the employees are not held responsible for damages caused by an individual. This concept sharply contrasts with direct liability concept in reference to partnership business. The partner whose action resulted in direct liability is responsible for the damages suffered. Supervisors or those who were concerned with monitoring of partner when undertaking duties are not responsible for direct liability as the case is for vicarious liability in company setting (Gibson & Fraser, 2009). A trust is a corporation organized to undertake the fiduciary obligations of another business entity. It acts as an agent of another business entity. In such business undertakings, employees and the principals have had the tendency of acting in ways that result in liabilities. In a trust firm, vicarious liabilities committed by the employees are often assigned to the principal of the trust firm. As a trustee firm, the principal has direct control over the actions of its employees. Principal acts as the employer of the trust firm hence he/she is vicariously liable for negligent acts of the employees which occur in the scope of employment. Primarily, an act is considered to be within the scope of employment when it is authorized by the principal. Unlike vicarious liabilities, direct liabilities in a trust firm are directed to specific individuals. Individuals are responsible for their actions (Lawlor, 2007). Lawlor (2007, p. 6) asserted that the conditions for the occurrence of vicarious liability are quite different. In a corporation, vicarious liabilities are associated with the failure by the supervisors to deliver their duties as expected. Vicarious liability can occur when a supervisor or any other person who is direct control of the employees fails to supply adequate information to the supervisees. This would paralyze proper practice in business undertakings. The liabilities are also associated with supervisor’s failure to review errors commonly committed by the supervisees and assess their skill level. In most cases, vicarious liabilities are directly attributed to poor practices by the managers or the supervisors. On the other hand, direct liability occurs due to the actions of the employees. As stated earlier, direct liabilities occur due individual negligent acts which do not have any close relationship with the duties of the immediate supervisor. In a partnership setting, a partner’s negligence during business undertakings often leads to direct liability. Direct liability in a company always occurs under various circumstances. Employees are very important assets of any business entity. Therefore, company’s management ought to undertake proper selection and supervision process of employees. Basically, it is not enough that selected employees have relevant skills and experience in the relevant areas. Therefore, the management of the company (employer) should establish rules and regulations that guide and direct employees in the working environment. Due to lack of these rules and regulations, an employee may act in unexpected ways thus causing damages to other parties (Gibson & Fraser, 2009). In a company context, the entity (employer) has the right to be indemnified. Using Employers’ indemnity as a permissible tool, the principles of vicarious liabilities can also be bypassed with. Employers ho have been successfully sued for the damages can also sue the tortfeasor for indemnity, and this may enable him/her recover the damages back. However, the employers’ indemnity principle is not applicable direct liability especially in regard to partnership business. This is because of the fact that the individuals are held responsible for the damages suffered (Gibson & Fraser, 2009). Unlike direct liability, vicarious liability is sophisticated. In company, the liability is directly linked with both the person who committed the offence and the employer (company) for whom the person who committed the wrong was working (Lawlor, 2007). In a company, the liabilities resulting due to the actions of employees can also be applied to the employer. There is no clear-cut between the employer and the employee when vicarious liabilities occur. Primarily, the law governing vicarious liabilities is not concerned with whether or not the employees are being paid for their actions, but is focus on the fact that the employee is working on behalf and the control of the principal or the employer. In direct liability, the person who committed the offence is responsible for liabilities arising due to his/her actions. It does not matter whether or not the person is working on behalf of the principal/employer. In case of a corporate entity, the employer will not get involve in the case under whatever circumstances (Lawlor, 2007). In vicarious liability, the responsible party for the damages has not breach duties to the plaintiff. However, this person is held liable for the damages because of the lawful imputation of duty that facilitated the occurrence of the incidence. Vicarious liability arises only when there is a relationship between the wrongdoer and the employing party. In direct liability, the person liable for damages is the one who has committed the offence, and it lacks the concept of imputation of responsibility. The liability is not concern on the fact that the employee was working on behalf of the employer (Lawlor, 2007). The transfer of liability from one individual to another is an ancient concept that characterized common law. This concept has been widely applied when handling particular. For instance, an employer is bound to be liable for liabilities arising due to acts of their employees or the principal taking full responsibility of the actions of their agents. This concept features in vicarious liabilities where the cost arising due to the errors committed by the agents are assumed by the enterprise itself (Lawlor, 2007). Unlike direct liability, vicarious liability ensures that damages suffered are held accountable by the financially responsible person other than the person who committed it. This concept is applicable especially in corporations and associations. In partnership context, the concept does not apply since partners are responsible for their course of actions. Partners are the shareholders of the premise hence have neither the principal nor the employer who can be held responsible for their actions. The concept of transfer of liability is not applicable in partnership business since individuals are solely responsible for their actions. Under transfer of liability, the benefits accruing to the original endeavor that established the context which facilitated the occurrence of the damages are used to finance the liabilities or the consequences (Lawlor, 2007). At common traditional law, the general concept that any liability is personal as opposed to being vicarious enabled corporations to escape the punishment of being held accountable for the liabilities. This rule was based on the fact that the corporation in question cannot in itself engage in physical activities. However, this trend changed during twentieth century as evident by gradual elimination of such shortcomings. Under current statutes, companies, corporations and trust firms are vicariously liable for damages resulting from specific conduct of employees when undertaking business operations. Despite these changes, the scope and the fairness remain at play and center of controversies when handling such matters. When defending direct liabilities, the senior counsel rely on the fiction that employee’s actions constitutes the actions of the corporation. However, this fiction cannot be applied when defending vicarious liability in a corporation. Convincingly, the vicarious liability for companies and corporations are justified basing on the basic principles since they cannot lead to imprisonment and does not convey message of morality. This principle has its basis on the fact that corporations, unlike partnership, are not true person, hence the shareholders are the one who suffer great loss in cases of vicarious liability (Gibson & Fraser, 2009). In most cases, vicarious liability can be assigned to an employer in conjunction with direct liability. However, direct liability cannot be imposed to an individual in conjunction with vicarious liability (Gibson & Fraser, 2009). References Gibson, A & Fraser, D 2009, Business law, 4th ed, Pearson Education Australia, Frenchs Forest. Hinchy, R & McDermott, P 2009, Company law, 2nd ed, Pearson Education Australia, Frenchs Forest. Hanrahan, P, Ramsay, I & Stapledon, G 2009, Commercial application of company law 2009, 10th ed, CCH Australia, Sydney. Lawlor, R 2007, “Vicarious and direct liability of an employer for sexual harassment at work”, viewed 9 April, 2011, Read More