Australian Corporate Law, Application of the MDLA - Essay Example

Australian Corporate Law by Student’s name Code+ course name Professor’s name University name City, State Date Part A: 15 Marks (1) The parties that are involved in this case are as stated below: The Public Trustee of Queensland is acting as the Executor of the Estate of Joseph Edwin James (The 1stClaimant); Pitgate Pty Ltd (‘Pitgate’) (The 2ndClaimant); Ian Derek Meyer (‘Mr Meyer’) (The 1stDefendant); Rosemary Lynn Meyer (‘Mrs Meyer’) (The 2ndDefendant); and Meyer Gold Mining Pty Ltd (‘MGM’) (The 3rdDefendant). Initially, there existed a partnership that involved Joseph Edwin James (‘Mr James’) and Meyer Gold Mining Pty Ltd (‘MGM’). Then, the partnership components got altered following a formation of a new partnership that involved Pitgate Pty Ltd (‘Pitgate’) and Meyer Gold Mining Pty Ltd (‘MGM’). Mr James was still holding total percentage shares of 49 percent in the mining contract, which was also being in utilization of the partnership that was evident between Pitgate Pty Ltd and Meyer Gold Mining Pty Ltd. The public Trustee is representing the interests of the estate of the late Mr. James; together with Pitgate Pty Ltd, had an appointment as receivers as well as managers of the current partnership that existed between Mr. James and Meyer Gold Mining Pty Ltd and the Trustees of particular partnership assets. Mr. Meyer and Mrs Meyer are all directors of the Meyer Gold Mining Pty Ltd, and are both defendants in this case. Mr. Meyer, as per his capacity of the Meyer Gold Mining Pty Ltd, is also acting as an agent in the two partnerships. (2) The major concern that is meant for determination is if or not Mr. Meyer can be entitled to the benefits of the application, especially if his personal rights as well as his interests held in accordance to the application of the MDLA 415 were for his own benefit, or whether for the benefit of their partnership. (3) In the affidavit, the first respondent is swearing that he had never treated the interests of Mr. James in MDLA 295 as a part of Chillagoe Perlite business. The first respondent is seeking for an explanation on the application as meant recognizing that a Mineral Development Licence about the surrounding lands was an asset “which had potential value to the Chillagoe Perlite venture”, though proceeds that “as an untested and undeveloped resource, it played no part in the operation of the Chillagoe Perlite venture”. The first respondent explains the addition of MDLA295 as one of the assets to be held by the claimants pursuant to the Court order based on the fact that by treating treat it in that manner, could aid in the finalization of the administration of first respondent’s estate. The first respondent asserted that he made the MDLA 415, with the aim of protecting his personal interest, as well as that of his business “as a potential future operator of the Chillagoe Perlite venture”. (4) The counsel for the claimants referred the court to s 32 of the Partnership Act 1891 (Qld) which obliges the partners to be accountable of the benefits that are derived by the partners lacking the agreement of the other partners, from being used by the partners of the partnership business relationship. The scope of the provision also affects any transaction made following the dissolution of the partnership by the death of one of the partners. On September2008, during an assessment that was carried out on the plant as well as the equipment, the first respondent was claiming some extra assets, evident in the letter of the claimants on 9th September2008. Attached to this letter was a different listing which the first respondent had issued of the plant and equipment demanded by the Meyer interest. On 23rd October2008, the first respondent wrote to the claimants with yet a different list of assets that were being claimed on behalf of the Meyer interest. Therefore, the claimants were not set to agree with the allegations that were made without corroboration. (5) The court held that Mr. Meyer and Mr. James were not parties in the partnership. Independently, this provision is only applicable if there existed a possibility of ascertaining that both Mr. Meyer and MGM were a single entity. Though it could have been easy to ascertain that Mr Meyer and MGM were a single entity, the parties did not put that into consideration, the parties did not also find out if Mr. Meyer, being one of the directors in one of these partners, had by any chance benefitted from his position that meant Meyer’s benefits in MDLA 415 had been held in the best interests of MGM, which consequently held these benefits for the sake of the partnership. The court put into consideration the case Chan v Zacharia1. In this case, Deane J decided that the connection between partners remains a fiduciary. Also, following the termination of the partnership, the partners remain under the fiduciary compulsion to be cooperating in and acting in accordance with the set procedures for the realization, application and dissemination of the partnership property. The court held that Mr Meyer wasn’t individually one of the members of the partnership, and the decisions made by Deane J was applicable to him. (6) The ML 20152 is a mining contract being operated by the partnership. The court found out that the partnership in ML 20152 was being recognized by Mr. Meyer as a partnership asset. The court found concrete evidence in the references to “our current Perlite mining and manufacturing business”as well as to “our business”as a plain references to their partnership business. But the court found out that MDLA415 was arrived at in the name of the first respondent only. The application form from the first respondent entailed the following, as it seems to the handwriting of the first respondent:- “The Mineral Development Licence should be granted to facilitate the applicant ongoing investigation and development of the perlite deposit which lies withinthis area.” In the affidavit, the first respondent is swearing that he had never treated the interests of Mr. James in MDLA 295 as a part of Chillagoe Perlite business. Then the court held that MDLA415 was not a partnership but a venture by the first respondent only. (7) The suggestions that were made on behalf of applicants/receivers and the managers of the partnership referred to s 23(1) of the Partnership Act 1891 (Qld)2. The reference states that all the property that is initially brought into the partnership, or gotten on the basis of the partnership business, has to be and used by the partners solely in the partnership, and according to the partnership contract. But these submissions perfectly drew attention to the conclusion of Mason J in the case O’Brien v Komesaroff that not every property of each party used in the partnership should be perceived as to have been “brought into the partnership”; and it is the party who makes the final decision on whether the property being owned by the partner should become a partnership property. The request by the applicants/receivers and managers made it clear that it was not easy to get evidence from the it was no longer possible to obtain evidence from the first applicant regarding the arrangements made on the disputed property. The submissions referred to this statement made by McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd:3 “… In a claim based on communications with a deceased person, the court will treat uncorroborated evidence of such communications with considerable caution, and will regard as of particular significance any failure of the claimant to bring forward corroborative evidence which was or ought to have been available.” Mr. Meyer’s replied to the letter from the applicants by providing a handwritten record of the plant and the machinery of the partnership. Nevertheless, the letter had requested him to identify all the assets he claimed to be his, he didn’t do so at that juncture. (8) Partnership corporate might be legally chipped in into the partnership: if such items belong to a partner become partnership property depending on the contract between the partners, and the accented intention of the partners, not the operations of the Partnership Act, resolved eventually and finally the query in regard to the possibility of the property being owned by the partner turns out to be a partnership property. Based on the declarations by Mason Jin O ’Brien. As evidenced in Kelly v Kelly, the High Court made a citation on the passage evident in Miles v Clarke as follows: “No more agreement between the parties should be inferred than is absolutely necessary to give business efficacy to that which has happened.” The court order held that the first respondent had rights and interests regarding MDLA 415 for the benefits of the partnership that existed between Meyer Gold Mining Pty Ltd and Pitgate. The judge also held that the items of the plant and equipment that were in dispute weren’t partnership property, though were the property of Meyer interests. PART B The comparatively modernized idea of making use of corporate group structures in the operation of a business and help with the segregating assets seems to be common and rooted in the contemporary community. The utilities of this concept is based on the legitimate recognition and commendation of the discrete legitimate entity concepts as made applicable to all the members of the corporate groups, together with the wholly- plus partially-owned firms. The High Court of Australia characterized corporate groups to be entailing various corporations that are related by mutual or intertwining shareholdings, associated to the unified control or capacity to control. Ramsay and Stapledon carried a study regarding the predominance and usage of group structures within the Top 500 listed Australian corporate in the course of 1997. Their study unearthed that 89% of the corporate in the list were controlling additional entities. The large and more valuable firms seemed to exhibit additional controlled entities.4 In particular scenarios, subsidiaries might be taken to 'carry on the big businesses’ of the parent companies, or on the other hand, taken as if they are the 'agents' of the parent companies, whereby the parent companies fail to sufficiently resource the subsidiaries to execute their functions. In similar scenarios, the parent companies might have the liability for the dealings of the subsidiaries. In the context to the undeniable details regarding the BHP Billiton case, the commissioner held arguments that were contradicting the well recognized law principles suggestive of that one of the group companies, in the case, was a ‘mere conduit’ of its parent company. Supporting his argument, the commissioner tried to use div 243, of the Income Tax Assessment Act 1997 (Cth) (meant to evoke ‘excessive’ tax deductions for depreciated asset(s) financed by the restricted recourse debts) in a way characterized by the Full Federal Court as contentious. The BHP Billiton difference of opinion is noteworthy as it is the first case to be put into consideration the capacity of div 243.8.5 We have some legitimate restraints regarding the ability of companies structuring as corporate groups, with the directives of the corporate groups being grounded on the acknowledgement of all the group members, remaining as isolated legal entities. The advantages of distinct lawful status similarly entail inadequate liability for shareholder(s), putting into consideration wherever the firms are wholly-owned subsidiaries in the corporate groups. Majority of the profit making organizations and activities are shaped by the lawful fiction given by the fundamental legal principle. The idea of limited liability is usually rooted in legitimate perception and is a permanent truth regarding the political economy. The usage of corporate groups gives way to the dual levels of the limited liabilities that are available to the parents as well as the subsidiary firms. The common firms’ use of separate entity tactics within the Australian country by the High Court lead to the extensive usage of group structures.6 As an attempt to regulate the misuse of individual entities that operate in the corporate group(s) is looking behind the distinct corporate nature of the firms and holding the critical group controllers accountable for the activities or amount overdue of the group corporate. The law courts have acknowledged that the corporate forms might be misused and the possibility of numerous business individuals performing a form of ‘dance of the corporate veils’ and ducking and diving “behind the corporate veil’.7 An approach usually debated to be the foundation of the piercing of the corporate veil in the corporate groups is alleging that the parents and subsidiary companies are participating in the agency association. On the other hand, the principals are accountable of the contractual activities of their agents that act with the scope of their permission. An argument can be chipped in the dimension whereby parent companies fully control their subsidiaries, so that the subsidiaries could be perceived not to possess detached existence, the parent companies are the principals and are thus accountable for the authorized conduction of their subsidiaries. On the hand, an evaluation of the contemporary Australian resolution on this issue discloses this control—as well as the overwhelming control—of the companies isn’t adequate for the creation of implied agencies between the companies and the controllers. 8 The Australian corporate laws are rationally specific in affirming that the parents and subsidiary companies relations usually entail broad (even great) control being carried out by the parents, although, this isn’t adequate to pierce the corporate veil to ignore the lone and distinctive subsistence of the subsidiary entities. The idea piercing the corporate veil has a specific applicability to worldwide crimes. At the same time as the international companies are usually operating within the reasonably regulated developed countries, their activities progressively spread to continent subsidiaries usually existing within various developed and developing nations. Wherever the activities of the global subsidiaries result to damages, plaintiffs might opt to look for redress from the controlling entities. This might be pleasing since the parent companies exercised significant control over the activities of the subsidiaries, or since in practice the controlling entities are better resourced to offer compensation to the plaintiffs for the harm done. This might be the case since company construction is usually, and legally, used in quarantining liabilities for high risk ventures. In Australia, as in majority of other ordinary decree jurisdictions, laws provide reasonably little regulation on the manner in which and the time the corporate veil may be pierced. Due to the aforementioned issue, majority of piercing in Australia happens through the recourse to the common laws. On the basis of the common law, we have no explicit law or established doctrine through which courts are to pierce the corporate veil as a way of acknowledging the roles of various firms in the corporate groups or the liabilities of members for the corporate obligation. This is evident in what Rogers AJA asserted that9 “The threshold problem arises from the fact there is no common, unifying principle, which underlies the occasional decision of courts to pierce the corporate veil. Although ad hoc explanation may be offered by a court which so decides, there is no principled approach to be derived from the authorities…” in spite of the observations made by Rogers AJA – several years ago – that there lies a strong point in the argument that the asset(s) and liabilities of the parents and subsidiaries have to be amassed wherever it can be exhibited that the approach of the corporate in the business life was meant as a treatment of the asset(s) and liabilities the same as those of the groups, there isn’t established doctrine in law within these provisions.10 On the other hand, in regard to Rogers AJA, two suggestions are put across that might be securely accepted. The first one, that possible only to execute control over the subsidiaries is inadequate to pierce the corporate veil. The second suggestion, the reality of a number of controls over the subsidiaries is inadequate. Away from that, uncertainty is evident. As an obvious law, corporate won’t be found to be ‘agents’ of their members, even during the course of the cases of a corporate under the ownership and control by one shareholder, or agent of the parent companies that exercise control over them. This is perceived to be flowing from the different legitimate entity doctrines recognized in Salomon’s case. Majority Australian law courts have been hesitant to pierce the corporate veil based on Agency since the “There is no common, unifying principle, which underlies the occasional decision to pierce the corporate veil’’11 Reference List Ian Ramsay and Geof Stapledon, 2001, ‘Corporate Groups in Australia’ 29 Australian Business Law Review 7 Commissioner of Taxation v BHP Billiton Finance Ltd (2010) 182 FCR 526, 279 [92]. Walker v Wimborne (1976) 137 CLR 1; Industrial Equity Ltd v Blackburn (1977) 137 CLR 567 Corporations Act 2001 (Cth) s 588V Ian Ramsay and David Noakes, ‘Piercing the Corporate Veil in Australia’ (2001) 19 Company and Securities Law Journal 250. Briggs v James Hardie (1989) 16 NSWLR 549 (at 567) Qintex Australia Finance Ltd v Schroders (1990) ACSR 267 at 269. Fords Principles of Corporations Law at [4.250] Chan v Zacharia (1984) 154 CLR 178 S 32 of the Partnership Act 1891 (Qld) Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Read More