Issue 1: Scallop Fishing Quotas and Incorporation of a Company
1. Issue: This is a case which would discuss the provisions relating to the Australian Common Law. In the given case there is a fisherman named as Bob Beech who is mainly involved in commercial scallop fishing in New South Wales. Under this type of fishing there is a certain quota system since the availability of fishes are very less in that region. Due to this Scallop Fishing and Marketing Act has provided a quota system. Under this system a person must apply for a quota which would allow him to catch only 50 tonnes of scallops in a calendar year. The authority itself would purchase all the scallops on behalf of every person. There are certain offences as well which every person has to bear if they violate any norms set by the authority. Now Bob’s daughter had advised him to set up a company so that he could catch 100 tonnes of scallops. Hence we need to conclude that whether the advice given by his daughter is correct or not. To give a correct conclusion one needs to understand the provisions which are given below. (UAC, 2017)
Rule: As per 124(1) of the Corporations Act, 2001 a company has the legal capacity and powers of an individual both in and outside the jurisdiction. This proves that a company is separate from another business or individual with value to accountability. A corporation separates the action of an entity from individual and other companies. Even the case of Salomon v Salomon & Co Ltd (1987) had a case of separate legal entity. This describes the use of separate legal entity and how it has to be considered different from other companies. If a person has formed a company then it would be treated as a separate legal entity. If he is doing any business as individual and also as a director in a company then it would be considered a separate legal entity. (James, 2017)
Application: now the above mentioned rules would be applicable in the given case. In this case an advice is given by a daughter to her father regarding a separate legal entity. Bob was a fisherman where several rules were their regarding fishing. The Authority had clearly mentioned that a single person can purchase maximum 50 tonnes of scallops in a single year. If any person is purchasing more than that then he would have committed an offence against the law of the Authority. The offence would amount to $100,000. Every person who tries to sell the scallops to a person other than the Authority would be held punishable. Bob wanted to expand his business and he has the capacity to sell more than 50 tonnes of scallops of fish. Now as per his daughter he could start a company and can easily earn more money. Now as per the law mentioned by the Marketing Act Authority, a person must apply for a quota which would allow him to catch 50 tonnes of scallops every year. Only 50 tonnes of scallops would be allowed to every person in a single year. The law has mentioned only about a person, that a single person can catch 50 tonnes of scallops every year. Law is silent about the provision relating to separate legal entity. Every single person would mean, any separate legal entity. Now if Bob opens a new company then he can also catch additional 50 tonnes of scallops since it is a separate legal entity. Bob as an individual and Bob as a director of a company are two separate persons. Both these cannot be mixed up together. It cannot be treated as same person. Bob can use this provision as the base and can incorporate a new company and can expand his business.
Rule 1: Separate Legal Entity of a Company
Conclusion: as per the provisions mentioned above, Bob’s daughter’s advice was correct, he can open a new company and can do business from there as well. In this was he could easily catch 100 scallops of fish every year. To put a restriction to this the Authority has to change the definition of person in their Act. Once that is changed, no other person can take advantage of the law.
2. Issue: the current case study is a case negligence. With the help of this case study we one would understand the provisions of negligence tort in Australia. To answer this question one needs to understand the issue. New Nirvana Ltd is an Australian company which is controlled by members of a hard rock band. The company has many subsidiaries which is responsible for setting up and running the band’s concerts. One of the subsidiaries named as Nuclear Blasts Sounds Pty Ltd. This subsidiary is mainly responsible for setting up sound equipment at various concerts in Australia. During one concert in Australia, the sound of the speakers was so loud that five of the people who attended the concert suffered permanent hearing loss. But the most unfortunate incident was that company is having no negligence insurance under their law and hence they cannot claim damages. So as per the law can they claim damages from the holding company. To answer this one need to understand the provisions of negligence as per Australian Law. (AustralianGovernment, 2017)
Rule: A negligence tort is a legal action which can be taken by a person to whom the defendant owed a duty of care. If the plaintiff owes any duty of care to the defendant and then if he ignores it then it would be termed as negligence. Negligence tort consists of three elements which are discussed below: (Tort, 2017)
- Duty of care: Plaintiff is responsible to perform the duty of care for the defendant. If he fails to do so then it would be called as negligence.
- Breach of duty: if the plaintiff fails to take care of the defendant then it would be considered as a breach of duty. Hence plaintiff would be held responsible for it.
- Damage: if the defendant proves that the plaintiff of negligent in performing the duty of cares then he is liable to pay damage charges to it. (Findlaw, 2017)
The most important point in the negligence law is that the plaintiff must be negligent in performing the duty of care and the defendant must prove that the plaintiff was negligent. If he fails to prove that then the plaintiff would not be held responsible.
Application 1: Bob’s Ability to Catch More Scallops through a Separate Legal Entity
Application: this is a case of negligence where company failed to perform the duty of care for its audience members. In this case company is the plaintiff and the audience members are the defendants. Nuclear Blasts Sound Pty Ltd was responsible for setting up the sound system for its holding company. For a concert in Australia, the sound systems were set up but the sounds were so loud that five of the audience members had permanently damaged their hearing system. It was the responsibility of the company to take care of the audience. But the company failed to do so and apart from that they even had no negligence insurance in their law. Nuclear Blast Sounds Pty Ltd was a subsidiary company of New Nirvana Ltd, and they were formed only to do the business for its holding company. If New Nirvana Company was not there then Nuclear Blasts Sounds wouldn’t have any business. This means that its business was completely depended upon its subsidiary. Now if due to the negligence of the subsidiary company, holding company has to bear all the damage for the negligence. It is clearly mentioned in the tort law that that if defendant proves that plaintiff was negligent then it has to pay damage charges. In this case it is clearly seen that five of the audience members were inured due to the negligence of Nuclear Blasts Sounds Pty Ltd. Now since company is not having any negligence insurance clause its holding company, New Nirvana Ltd has to pay the damage charges to all the five members injured. (Commission, 2017)
Conclusion: now as per the provisions of the Negligence Tort Law, New Nirvana Ltd is liable to pay damage charges to all the five audience members who were hurt during the concert. The same was in the case of Donoghue v Stevenson 1932 and. The same provisions were also mentioned in the Civil Liability Act 2002 of NSW.
3. Issue: This is the case where one needs to see the action taken by the company against its members. Three members named as Simon, Don and Michael set up a project management company called as Millennium Pty Ltd. Don was appointed as a solicitor of the company. It was decided that Don would be the solicitor for any land purchase or sales made by the company. It was also mentioned in the articles that if there is any dispute which arise in the company and its members then the matter should be taken firstly to the arbitrator and then for any court proceedings. After a certain number of years Simon and Michael decided that they should appoint another person as a solicitor for the company instead of Don. Now due to this Don wants to take legal action against the company. Hence in this case one needs to see the actions which the company can take. (Henry, 2017)
Conclusion 1: Bob Can Incorporate a Company to Increase His Scallop Catch
Rule: as per the Corporations Act, 2001 company has the right to take legal action against the member of the company. If a member has gone against the provisions mentioned in the articles of association then company has the right to take action against that respective member. The action taken by the company has to be within the provisions mentioned in the articles. (Austii, 2017) The provisions mentioned in the articles of association should not override the rule which is mentioned in the Corporations Act, 2001. If the provisions made is different in both the cases then the law as per Corporations Act would prevail over it. If any of the members has override the provisions mentioned in the articles of association the action has to be taken against the concerned member. (ASIC, 2017)
Application: the articles of association of the company has clearly stated that if there is any conflict between the members and the company then firstly they have to go to an arbitrator and then to the legal court proceedings. In the company decisions are decided as per the majority. Majority of the members in a company can take a decision. By applying this power, both the members, Simon and Michael had decided to remove Don as a solicitor of the company and instead appoint another person as a solicitor who is much better than him. The problem here was that the constitution of the company has clearly stated that Don would be remaining as the solicitor in any land purchase or sales made by the company. Now to remove Don from the position of the solicitor, the constitution of the company has to be changed. Without changing the constitution of the company, both the members cannot remove Don from his position. So the company has the right to take action against both the members since they haven’t gone as per the provisions mentioned in the articles of the company. Company has to first remove Don’s position from the constitution and then he can be removed from his position. Without changing in the constitution no action can be taken against Don. He will be remaining as a solicitor of the company unless his name is removed from the constitution. This can be done by passing a special resolution in an ordinary general meeting. (ASIC, 2017)
Conclusion: Company has the legal right to take action against both the members. As per the articles, first company has to go to an arbitrator, and if not succeeded then or the court proceedings.
ASIC, 2017. /asic.gov.au/. [Online] Available at: https://asic.gov.au/for-business/your-business/protecting-yourself/dealing-with-businesses-and-companies/ [Accessed 29th May 2017].
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Austii, 2017. austlii.edu.au. [Online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html [Accessed 29th May 2017].
AustralianGovernment, 2017. legislation.gov.au. [Online] Available at: https://www.legislation.gov.au/Details/C2016Q00058 [Accessed 29th May 2017].
Commission, L. S., 2017. lawhandbook. [Online] Available at: https://www.lawhandbook.sa.gov.au/ch01s05.php [Accessed 29th May 2017].
Findlaw, 2017. findlaw.com.au/. [Online] Available at: https://www.findlaw.com.au/articles/1625/changes-to-negligence-law-in-western-australia.aspx [Accessed 29th May 2017].
Henry, 2017. hcalawyers.com.au. [Online] Available at: https://www.hcalawyers.com.au/blog/the-10-largest-class-action-lawsuits-in-australia-and-the-world/ [Accessed 29th May 2017].
James, N., 2017. Seperate Legal Personality. Legal Reality and Methapor, p. 12. Tort, 2017. Tort. Negligence Tort, 1(1), p. 25.
UAC, 2017. uniassignment.com. [Online] Available at: https://www.uniassignment.com/essay-samples/law/the-separate-legal-entity-concept-law-company-business-partnership-essay.php [Accessed 29th May 2017].
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