Corporate Law and the Law of Negligence - Assignment Example

Corporate Law By student’s name Course code+ name Professor’s name University name City, state Date of submission Question 1 The court in Smith v Anderson (1880) 15 Ch D 247 held that a partnership is comprised of individuals bound together by a contract between them to work together for a common object. The Corporations Act 2001 (Cth) under section 115 limits the number of partners to twenty. Taxation aspects of a partnership are dealt with under the Income Tax Assessment Act 1997 (Cth) The Partnership Act 1892 (NSW) provides for the three elements that are necessary for a partnership to exist namely carrying on a business, that is common and with the goal being to make a profit. Once a partnership is held to exist, every partner becomes an agent of the firm such that any act of one of the partners is binding on the partnership. In Re Agriculturalist Insurance Co (Baird’s case) 1870 LR 5 Ch App 725, it was held that the statutory agency relationship of the partners is the basis for the fiduciary relationship between them. Section 5 of the Partnership Act 1891 (Qld), Partnership Act 1891 (Tas) and Partnership Act 1891 (SA) provide that where a partner acts in line with the usual way of business such acts will be binding on the firm. However, there are exceptions to this rule. A partner may be sued by a third party where his actions were outside of the scope of business of the firm. According to section 9 the Partnership Act 1997 (NT), a partnership will not be bound by the acts of the partner where the partner had no authority to do such acts and the person dealing with the partner knew so or did not know or believe that such the partner was actually a partner in the firm. This means that any liability arising from such acts that are outside the scope of the business of the partnership will be borne by the partner, not the partnership. However, in Mercantile Credit Co Ltd v Garrod (1962) the court held that a firm may still be bound by a transaction by a partner that is not within the usual business of the partner where such a transaction is common to other firms in the same industry. In Bowman v Bacon (1897) 18 LR the court held that a partnership would also not be bound where a partnership has given notice that the firm will not be bound by the actions of a partner. According to section 15 of the Partnership Act 1895 (WA), such an agreement is binding on the partnership and on outsiders who have notice of the agreement. Where a partnership is not bound as is the case in the circumstances stipulated above, the outsider who dealt with the partner can sue the partner personally. A partner may also be sued by the partnership. Section 9 of the Partnership Act 1958 (Vic) and the Partnership Act 1963 (ACT) provide that a partnership is not bound where the partner had no authority and the person dealing with the partner knew of such fact. This means that where the outsider reasonably believed that the partner was indeed a partner and had the authority to act, the partnership will still be bound. This was the position of the court in Watteau v Fenwick (1893). Once the partnership has discharged its liability, the other partners can then proceed to sue the partner for the liability arising from his actions as was held in Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541. However, in Wilson v Turman (1843) it was held that once a partnership has ratified the acts of the partner, the partnership becomes liable for the acts of the partner. Question 2 Part A Betty is both a shareholder at Pizza Plus Ltd and a director at Dominos Australia Ltd. Both companies make and sell pizzas in Australia. Her actions of taking secret details about the drone delivery service and customer lists from Dominos to Pizza Plus amounts to sharing trade secrets or industrial espionage. As a result, Pizza Plus may be exposed to civil and criminal corporate liability. In ABC Developmental Learning Centres Pty Ltd v Wallace (2006) VSC 171, the court, in reference to the Children’s Services Act 1996 (Vic), held that a company could be held liable for the criminal acts of its agents. Civil liability arises because Pizza Plus, through the director, accepted Dominos’ trade secrets knowing that they were wrongly obtained. The Telecommunications (Interception) Act 1979 criminalizes obtaining of information or data illegally. However, since Betty was a director, such criminal liability may not exist since she had authority to access the information. This means that corporate civil liability applies in this case. The Corporations Act 2001 (Cth), under section 124, affirms the position established in the case of Salomon v Salomon and Co. Ltd (1897) AC 22 that a corporation is a separate legal entity. As a result, the law gives certain legal rights and responsibilities to companies as though they are individuals. In Tesco Supermarkets Ltd v Nattras (1972) AC 153 the court established the position that personal characteristics such as knowledge and state of mind may be attributed to corporations due to civil and criminal liability. The liability of a company can either be primary or secondary (Harris et al. 2016, 246). Primary liability arises when the corporation is deemed to have committed the wrong. This is where a natural person is considered to be the directing mind and will of the company. Persons such as directors and executive officers may lead to primary corporate liability of the company. In H L Bolton Engineering Co Ltd v T J Graham and Sons Ltd (1957) 1 QB 159 the court held that it is necessary to equate the legal personality of a corporation with the personality of an individual for the purpose of addressing corporate liability (Harris et al. 2016, 246). The actions by Betty, however, do not fall under the primary liability category. Betty is a shareholder of the company and hence not involved in the running of Pizza Plus. As a shareholder of the company, Betty can be regarded as an agent of Pizza Plus which can lead to secondary liability on the company. Secondary liability is when a corporation is made liable for the acts of its employee or agent. Will is the director of the company. The fact that he accepted the information knowing that such an action is wrong means Pizza Plus can also be exposed to primary civil liability for Betty’s actions. Part B Jill suffered injuries as a result of the falling of the drone used by Pizza Plus to deliver pizza. The serious injuries suffered by Jill lead to the possibility of tortious liability on Pizza Plus. On this issue, tort law and the law of negligence would be involved in regard to the injuries. The law of torts applies to rectify any injuries or financial loss suffered by a victim due to the actions of another person. A company can be liable in tort where a person has suffered loss as a result of the actions of the company. Where such injuries arise from the actions of an agent or employee of the company, the company will be liable. Section 769B of the Corporations Act stipulates that any conduct on behalf of a corporation by a director, agent or employee of the body which is within the scope of the person’s authority is deemed to have been done by the company. Such provisions are necessary to ensure that consumers are protected from the actions of corporations as is required under section 87CB the Australian Competition and Consumer Act 2010 (Cth). The law of negligence bestows upon individuals in a special relationship the duty of care. The court established the duty of care in the case of Donoghue v Stevenson where it held that a person is required to take reasonable care to ensure that their actions or omissions do not cause injury or harm to the other person. This requirement is established through the Civil Liability Act 2002 (NSW). A special relationship existed between Pizza Plus and Jill since he was a customer. Pizza Plus has the duty to ensure that their use of drones to deliver pizza to customers does not cause harm to the customers. The fact that the drone fell and injured Jill means that there was a breach of the duty of care. Such a breach means that Jill can sue Pizza Plus seeking compensation for the injuries. The decision to start delivery of pizza through drones was made by Will who was the director of the company. In Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd (1915) AC 705 the court established the organic approach to determining when a decision can be considered to have been done by a person who constitutes the directing mind and will of a body corporate. According to the organic theory, the people who are entrusted with a higher degree of responsibility than others in a company are considered to be the directing mind and will of the company (Harris et al. 2016, 247). Decisions of people such as directors which cause injuries will result to primary liability of the company for tortious wrongs. Such rules are in line with ASIC’s power to protect consumers under Division 2 of the Australian Securities and Investments Commission Act 2001 (Cth). The decision to use the drones was made by Will as the director of the company. The company may be sued for primary liability in negligence. From the above analysis, Jill can take legal action against Pizza Plus. He would sue the company under the law of negligence seeking compensation for the injuries he suffered from the falling drone. References Australian Competition and Consumer Act 2010 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) Children’s Services Act 1996 (Vic) Civil Liability Act 2002 (NSW) Corporations Act 2001 (Cth) Harris, J, Hargovan, A, and Adams, M 2016, Australian Corporate Law, LexisNexis Butterworths, Australia. Income Tax Assessment Act 1997 (Cth) Partnership Act 1891 (Qld) Partnership Act 1891 (SA) Partnership Act 1891 (Tas) Partnership Act 1892 (NSW) Partnership Act 1895 (WA) Partnership Act 1958 (Vic) Partnership Act 1963 (ACT) Partnership Act 1997 (NT) Telecommunications (Interception) Act 1979 (Cth) Read More