Goudberg Versus Herniman Associates - Case Study Example

Precis and Problem Solving August 21, 2008 Precis and Problem Solving Assignmet Question prcis) Goudberg v. Herniman Associates Pty Ltd (2007) The argument or dispute of this particular case centers on the idea of which was conceptualized by Williams, and of which involves the conversion of dining area of certain hotels in Australia into a franchised eateries. Williams, having had various experiences, formed the concept that hotels in Sydney, Australia, make very little profit from dining facilities while they are obliged to provide. Accordingly, Williams conceptualized the idea of putting a chain of franchised restaurant in hotels. William thought that there would be advantages of the project especially to hoteliers, and there would be a prospect of enormous financial rewards to the person or entity setting up such scheme. Williams, proceeded with it and it was then that Goudberg got in. It was then that they made several trips to the U.S. and that they met with Mr. Herniman which in the course would provide architectural services. It was in September of 2000 that Mr. Herniman got in to the scene. Accordingly, his firm was prepared to undertake a certain amount of preliminary work to assist Williams and Goudberg to get the project happening. In 2002, it was already considered by Williams that the concept was already starting to take its practical shape, but it was in the same year that the project (Industry Food Services Pty Ltd) was incorporated. There was no agreement reached with applebee and no capital was ever obtained. In consideration to the series of events, the work done or performed by both Williams and Goudberg can not in any way considered exploratory or preparatory, but it actually carried out as carrying on a business. In the event that the two were conducting market research, traveling to the U.S. and negotiating with applebee, it can not be concluded as conducting a business at the time that they entered into arrangement with Mr. Herniman. In the conclusion cited by Kellan, and reference with the definition of "partnership, as a relationship which subsist between persons carrying or business in common, with a view of profit." The view of Williams never took to its preliminary stages because as cited in the dispute, nothing really came out, all the activities rendered by both Williams and Goudberg were just exploratory or preparatory in nature. Factual circumstances does not point to any conclusion that there was partnership involved. Herniman, being the respondent was not able to establish that there was really a partnership because as cited "he had never performed any architectural preparations to the proposed project"(reading,2007) Accordingly, his team was prepared to understate a certain amount of preliminary work to assist Williams and Goudberg to get the project happening. Assignment Question 2 Problem Solving A business that is well conceived and well planned possesses certain inherent advantages. At the same time, the fact of its newness may have significant disadvantages(Hamilton 2005) One of these comes in the planning. The starting point of any program of a business is a careful estimate of requirements. The usual starting point of a business forecasts is the record of the immediate past, modified for foreseeable variation during the forecast period. The possibility of substantial errors of forecast is great. Unfortunately, the spirit of optimism which is the necessary accompaniment of new ventures in business tends to produce underestimates rather than overestimates. Lets take a look at one typical case of a business partnership that did not have any starting point of planning. The case of Ken and Maria. The start of their joint venture or partnership is an example of a business that did not have smooth take off. There are rules in establishing a partnership that they have overlooked. At the start, it seemed that Ken was the industrial partner, and Maria was the one who financed everything. Since the registered name of the business bear the names of both of them, it is understood to be a partnership. A "partnership" is defined as a type of business entity in which partners(owners) share with each other the profits or losses of the business undertakings in which all have invested. The partnership structure does not generally incur a tax on profit before it is distributed to the partners. In civil law system, a partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise, contribute it by combining property, knowledge or activities, and share its profits and it is also considered a legal entity(Irving,1995) Loopholes of the partnership at the very beginning, are already seen from one's legal point of view. First, the lease of the restaurant premise should have been made in their names. Second, the bank S.A account should have been a joint account. The understanding should have been that both Ken and Maria, in all the undertakings of the restaurant, all other transactions would bear the names of both of them. Third, the understanding was that Maria lent the money to Ken and that he acknowledged his obligations to repay. Fourth, both Ken and Maria had the authority to operate the bank account independently of the other. It should have been that any transaction entered into bank account, both of them or their signatures appear in all legal transactions. At the beginning of the second year, it can be noted now that the name of the restaurant became registered for a company solely owned by Ken. Therefore it can be said now that the restaurant business in now a sole proprietorship form of business. That means, Maria is no longer part owner of the said business, but rather, a mere employee of Ken. Maria declared some profits of the restaurant in her tax returns in the year 2001/2002, which means she was still part owner during the inclusive dates, Although Ken did not declare profits in 2001/2002, it could be understood that Ken being a partner of Maria may or may not declare his profit in their partnership. In the year 2002/2003, and the subsequent years, Ken's tax returns showed income equal to the net profit of his Ken Corp. company. In the case of Maria, her tax returns in 2002/2003 and onwards did not show income from the restaurant business. The involvement of Maria and Ken during the first year of operation was all out in order to establish the restaurant. After that, Maria only was involved in the operation of the restaurant when Ken was ill or otherwise unable to attend the restaurant business, But still both of them were clearing the till, Maria involved herself in the hiring and firing staff. Other members of the family of Maria frequented the restaurant to eat without paying, thinking that the restaurant belonged to Maria. Because of hard work and perseverance, the restaurant business is now worth $500,000.00. But Ken and Maria are starting to fall apart, personally, that is. Ken is now asking Maria to pay out his share of the business, and Maria on the other hand is now claiming that the business belonged to her alone and refuses to pay Ken anything. This argument would fall under one's ignorance of the law(Kempner,1976). Does Ken knew that when the company became KenCorp, he was already the sole owner of the company. Maria is no longer a partner but a mere employee of Ken. Didn't Maria realized that she was no longer a partner of KenCorp. More so, she had stopped declaring in her tax returns the profit of the restaurant. Didn't the two of them tried to ask anybody about the legal matters regarding the state of the company Or were they just as reluctant as ever because they never thought that a falling out may happen It appears to me now, in all honesty that, Ken is the one being cheated on or aggrieved. In the beginning of their story it was as though, Ken was the one who was to take advantage of Maria. Ken was penniless when they started their partnership, and Maria was more than willing to help him. Is was also noted that the amount which Maria deposited in her name for the revolving operation of the restaurant was to be paid later by Ken. Therefore, Maria has no right claiming that the company belongs to her. Ken, on the other hand must now seek legal advice from a lawyer. He should present all the necessary documents of ownership of the restaurant. By then he could claim the amount he is asking Maria to pay him. Or if it turns out that the company really belongs to him from day one of KenCorp, then he has all the right to take what really belongs to him. But let us not stop there. Being his personal partner for more than 6 years, and with the help he got from Maria from the start, financially that is, I guess he must also have his conscience cleared. He must also remember that it was Maria's money that started the restaurant business. In the face of the law, Maria has no right claiming that the company belongs to her because all legal matters points out that the legal owner of the restaurant is Ken. On the other hand, she was a key in the success of the business. We can also argue that Maria has every right to claim part of ownership because she can also prove that she was the one who did the financing in the beginning. If Ken were to follow or acknowledge the advice of the lawyer that the "company really belongs to him" and that Maria is never a part of KenCorp, but a mere and loyal employee and that Maria must really give up the company, I guess it would be fair enough that he must give Maria 50% of ownership or he gets the 50% of the company's present worth because he said he is no longer interested in Maria and the successful restaurant. REFERENCES Hamilton, Robert W., Macy Jonathan,R.(2005), Cases on Corporation, Including Partnership and Limited Liability companies, 9e, West Group Irving, Smith Kogan (1995) Modern Business, Public Relations, Alexander Hamilton Institute Inc., New York. Kempner, MacMillan, Hawkins(1976), Business and Society, Richard Clay(The Chaucer Press)Ltd., Bungay, Suffolk, Great Britain www.austlii.edu/cgi-bin/sinodisp/au/cases/vic/VSCA/2007/12html Read More