Q1
A. First and foremost, the business relationship present between the three individuals basically constitutes an incorporated limited partnership as stated in s1 of the Partnership Act (SA) of 1891. This means that the liability of the losses incurred in the operations of UA is to be shouldered by all the partners of the firm. (s44) The case indicated that they accuse Armi of treachery or disloyalty. Unfortunately they are not covered by s30 of the Partnership Act since they represent an incorporated limited partnership. This means that they could not sue for damages for this claim since Armi is not prohibited by law to compete with the company he owns with Bruce and Clint. However, a recent case indicated that there exists a fiduciary relationship between the three partners. (Blobel & Ors v Blobel & Ors, 2005) A duty of good faith, preserving confidence, and steering clear of any possible conflict of interest is essentially needed in a partnership. Moreover, the same case similarly noted that no one should also personally profit from the partnership opportunities.
A different outcome would have taken place if the company had been a corporation. Armi has does not represent the firm when he made a deal with BIG, not to mention the fact that the technology sold to the BIG is discarded by the UA. Given this fact, the actions rendered by Armi is thus not covered by s51c(4), meaning that he have no responsibility to inform the two other partners in UA about the deal he made with UA. As recourse by Bruce and Clint, the case did not mention any dissolution of partnership made. This means that Armi is still a partner in UA, thus he holds the liabilities incurred by the firm as much as Clint and Bruce were. This means that Bruce and Clint could ask the help of the courts to call on Arni’s participation in the payment of any payables and debts incurred by UA. On the other hand, they could also ask the help of the courts to initiate dissolution proceedings. (s35) This would mitigate their losses considering the fact that the company is nearing insolvency and has incurred a lot of debts. In this manner, the payment of the debts will be on the terms of the firm.
B. According to s44(b) of the Partnership Act (SA) of 1891, a partnership’s losses are to be paid by the firm. In this case, the liabilities that they have incurred in the acquisition of a merchandise by Friendly Finance Ltd. This is also indicated in the Blobel & Ors v Blobel & Ors case. The said case highlighted s9 of the Partnership Act 1891 stating that every partner in an organization is legally responsible for all the payables and obligations of the organization given that the partner is still considered a partner of the firm. In this context, Arni has already departed from the partnership, this would be found on the presumption that he has been expelled by the majority. Given this fact, both Clint and Bruce are thus liable for the payment of the debts incurred to Friendly Finance Ltd since they are now the entire composition of UA. The acquisition of the merchandise did not indicate that Armi bought it on a personal whim. As stated in the facts of the case, the firm has been making good use of the merchandise. They would just have to pay off the debts to Friendly Finance Ltd. On a similar note, Bruce and Clint may have to ask the help of the court on this one, once more for the dissolution of the firm. They could indicate that Armi, when he was still connected to the firm, has breached a partnership agreement in purchasing the merchandise from Friendly Finance Ltd which costs over $30,000. They could pursue a claim for breach of contract and fiduciary duty. (Ireland v Chia & Ors, 1999) Their agreement was that Armi was only to spend $20,000 on any purchase. This could only add up to the court’s favour to decree dissolution. In any case, the firm still has to recompense the payables they have incurred to Friendly Finance Ltd. In the case of Ireland v Chia & Ors (1999) legal dissolution of the partnership was granted by the courts.
C. UA have the choice to tell Fast Cars Pty Ltd to take the car back. They could also tell them that they should go after Armi because they have transacted with Armi, and he clearly is guilty of misrepresentation. Armi could not be a Chief Executive Officer of UA because it is not a corporation. It is registered as a partnership which means all three have equal decision making powers in the company. Finding the letter C-E-O appended on the name of Armi may have induced Fast Cars Pty Ltd to approve the sale of the luxury car. In addition, Bruce and Clint have the option to take legal actions against the payment of the remaining balance on the Ferrari that Armi bought using a partnership cheque. They could claim that they are covered by s75(2a) of the Partnership Act (SA) of 1891 which clearly indicated that any document including cheques should be “in connection with the conduct of the partnership’s business.” And with reference to the mission statement of UA, purchasing a luxury sports car is not inherently a part of any provision of “hardcore gaming action.” In addition, the said section of the Act also indicated the abbreviation “LP” is mandatory in issuing documents such as cheques. Bruce and Clint could claim that the approval of Armi’s purchase of the Ferrari was done without any due diligence and with gross negligence considering that the mode of payment made by Armi in fact indicated that he is not a CEO of UA and thus may not have been capable of buying such merchandise. In addition, the car was bought under the name of Armi and not in the name of UA. Clint and Bruce could point to the case of Blobel & Ors v Blobel & Ors (2005) that the liability for the car payment are not covered by the company considering the fact that Armi is no longer a partner of the firm.
Q2.
A. Tran should assert his right as a shareholder. There is this concept of shareholder primacy still present in corporate law. Traditionally, the concept of shareholder primacy has been considered as the primary mandate of the directors and senior officers of a corporation in the context of corporate law. Specifically, all the “energies” of the (1995, ) board should be geared towards the advancement of the shareholders in general. This claim similarly talks about the fiduciary obligation of the board of directors to make the decision making within the organization known to the corporation and its shareholder. (p7) And with the actions made by Bigadco Ltd, this duty might have been compromised. He could take legal action against Bigadco Ltd with reference to certain infringements in the Corporate Law Economic Reform Program (CLERP 9 Act). Specifically, disclosure on the remunerations of the directors should be taken so as to avert any more instances similar to what took place in the case of One.Tel. This has been the most notable in relation to corporate failure and remuneration of the directors. Specifically, in the said case, dubious amounts of bonuses were given to the chief executive officers of the company. ( 2002) With the public knowing of the doubtful nature of the said remuneration, the share price of the One.tel took a nose dive from its existing position.
Specifically, Tran could prevent the possible ratification of the corporate decisions made by Bigadco by taking legal actions regarding the company’s failure to give it full disclosure on the report as to the affairs (RATA). This is similar to what transpired to the case of Byrnes and Australian Securities and Investment Commission [2000] when the defendant was not able to substantiate whether the financial capability of the corporation could support the activities it sought to implement. In the case of Tran, he could carry out this lawsuit and consequently allow the company to cut a deal with him so that he could meet his medical expenses. On the other hand, the said lawsuit would also buy him time to liquidate his shares before the corporation’s value totally decline.
On a similar note, Tran could also seek the help of the Australian Securities and Investment Commission to make a banning order against the corporation. In this manner, the said commission could conduct an investigation pursuant to s837 of the Corporations Law as to whether the decisions of the board to increase the remuneration of the directors and the subsequent decline of the stock value of the firm are done in an “efficiently, honestly and fairly” manner. (2001) Thus, doing such a move will allow Tran to know whether the company has been using his investment for fraudulent means to advance their individual profits.
B. Under the Public Corporations Act 1993 of South Australia, a corporation must have a charter that will be able to distinguish the actual personality of the company. (s12) Specific areas like the scope of investment activities and operations are required to be presented in the company’s charter. In the case of Charles, there is indeed this kind of charter where it states its reason of existence: “investigate, promote and market alternative forms of healing and therapeutic interventions.” The intention of Dan, A, and B to boldly change the direction of the company generally contradicts this general purpose. With the shift from therapeutic interventions to alcohol and tobacco distribution, Charles has good reason to oppose it. Given that their organization is essentially a corporation, then the doctrine of ultra vires could come into play. Charles could sue for legal damages if the three other shareholders have pushed though with their plan. Charles could invoke s68 of the COMPANIES ACT (Cth) 1981 No. 89 of 1981 seeking to make the action void.
In the same manner, Charles could also press charges on Dan in the instance that they have taken actions realising the said bold strategic direction on the context of misrepresentation based on the Misrepresentation Act 1972. This has been reflected in the case of Carneiro & Anor V Robinson & Ors [2005] where the defendant made a claim that induced an expectation on the part of the claimant. This is identified in the case of Charles when he was induced into joining the corporation because of the objectives and products being sold by the company. Generally, Charles could claim that the change of direction of the company will essentially create an estoppel and even trigger a charge of misrepresentation because it has deviated to the inherent values advance before his accession to the corporation.
Ultimately there are two options for Charles; one is to establish to the courts that the direction of the company is going in total contradiction of what is initially stated in its charter. This means that Charles have to take the refuge of the judicial system as to protect the values and even his shares of the company. He has to establish that the decision of the company is beyond its own powers. On the other hand, Charles could also sue Dan for misrepresentation because of their use of the promise to initially “investigate, promote and market alternative forms of healing and therapeutic interventions” induced the participation of Charles in the corporation. The bold strategic direction towards which the company is heading, specifically distributing tobacco and alcohol, is the complete turn to what has encouraged him to join the organization.
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