Quota System and Offences under Scallop Fishing and Marketing Act
Can Bob by incorporating a company (the advice of Alice) double his catch and bypass the liabilities imposed by law?
In Australia, if any person desires to formulate a company then the same can be done by registering the same as per the law of the land. Every company which is registered must comply with the governing law and the provision of the Corporation Act 2001. (Incorporation. 2007)
When a company is established then it is separate in law and is considered as an artificial legal person. The separate legal personality signifies that a company has its own personality and has the capacity to hold property, make contract, enter into relationship, sue outsider, etc and every action that is carried out by the company is in its own name. The rule establishes that the acts of the company are not the acts of its officers and vice versa. No officer can be held liable for the actions that are carried on by the company in its own name. In Salomon v Salomon & Co Ltd (1897) it was held that a single man who has established a company cannot be held to be responsible for the actions of the company. Once a company is formed then it is an artificial person in law and is distinct from such sole director or shareholder. Likewise in Lee v Lee’s Air Farming Ltd [1960], it was held that a single person can become the director/shareholder of the company and can become the employee in different capacity as the company has a separate legal entity in the eyes of law.
But, various people has tried to take undue gains because of this special feature of Separate legal entity once a company is established. In certain situation, this separate legal personality of the company can be pierced and the veil can be lifted if there are situation of fraud. It was held in Gilford Motor Co Ltd v Horne [1933], that if a company is formulated to deceive any statuary provisions or to incur fraud then the courts are not reluctant and can price the veil of the company and can disregard the separate legal entity principle of the company and can hold the acts of the company as the acts of the officers and make them liable under law. (GV Puig, 2000)
The principles are now applied to the facts of the case.
Bob was a fisherman in New South Wales. The stock of scallops was limited and thus two laws are made under Scallop Fishing and Marketing Act to ensure their protection.
- Any person interested in catching Scallops must apply to quota which is maximum up to 50 tonnes in a calendar year;
- The Scallop Marketing Authority can purchase the scallops which are up to quota limit.
- No scallops can be sold to any other person except to the Authority.
Can Incorporating a Company Double the Catch and Bypass Liabilities?
Breach of any of the provision will impose fine up to $100,000.
Now,
Bob can catch up to 50 tones of scallops in a year. If he carries on the activity within such limit then it is no offence.
But, to double the catch, he can incorporate a new company which is distinct in the eyes of law. The company can catch the Scallop in its own name as it is a separate legal entity in the eyes of law and Bob can catch on his individual capacity. By, doing this he cans double his catch and thus the Alice of Alice can be fruitful.
But, it was held in Gilford Motor Co Ltd v Horne , that if any fraud is committed by the person in order to deceive any statuary provision then the veil of the company can be pierced ad the company an dist officers can be regarded as one. (Ramsay & Noakes, 2001)
So, in the given situation, fraud is committed by Bob so that he cans double his catch.
Thus, the veil can be lifted and Bob can be held liable for breach of the provisions.
Conclusion
Thus, though Bob can incorporate the company and can double his catch. But, these actions of Bob are not permitted in law as fraud is committed by him and thus veil of the company can be pierced and he can be held liable for breaching the provisions of law.
Whether the negligence incurred by Nuclear Blast Sounds Pty Ltd would make the New Nirvana Ltd liable for the same?
In common law, one of the significant legal principles which require analysis to resolve the issue is the Principle of negligence. The Principle of Negligence simply implies that when the wrongdoer/defendant is carrying out his acts which resulted in some kind of damage/injury to the aggrieved/plaintiff that he is responsible to avoid then he is negligent in his actions. In Donoghue v Stevenson (1932), the basic elements to prove negligence on the part of wrongdoer/defendant are established and the same are: (Treasury, 2002)
- Every wrongdoer/defendant must carry his transaction with due care so that no harm is caused to any aggrieved/plaintiff. But, the wrongdoer/defendant is only duty bound when the plaintiff is closely associated with him, that is, plaintiff is neighbors of the wrongdoer/defendant. If the acts of wrongdoer/defendant falls upon the plaintiff directly then they are neighbors if each other and is held in MacPherson v. Buick Motor Co.(1916). Also, if the wrongdoer/defendant can foresee the impact of his actions then he is duty bound to cater them with utmost care. Thus, every wrongdoer/defendant is under duty of care in order to avoid any action of negligence (Perre v Apand Pty Ltd (1999). (Norman, 2004)
- The wrongdoer/defendant should cater his duty of care and when such duty of care is not met because the wrongdoer/defendant has failed to meet the required level of care that is expected from him to perform, then, there is breach of duty of care and is held in Bennett v Minister for Community Welfare(1992). The degree of care varies with the situation but the same must be met by the wrongdoer/defendant to avid negligence.
- Because of the breach of duty on the part of wrongdoer/defendant causes damage to the plaintiff which is reasonably predictable by the wrongdoer/defendant and which is caused because of the breach of duty by the wrongdoer/defendant, then, the harm is caused and will thus make the wrongdoer/defendant liable under the law of negligence and is held in (Annetts v Australian Stations Pty Limited(2002)).
Now, when any subsidiary company is found to be negligent in its actions and is not capable to pay such liabilities nor has any insurance to meet the damages of its client, then, as per section 588V of the Corporation Act 2001, the liability of such subsidiary company must be borne by its parent company.
The principles are now applied to the facts of the case.
New Nirvana Ltd’s Liability for Negligence of Subsidiary
Nuclear Blast Sounds Pty Ltd which is the subsidiary of New Nirvana Ltd, was assigned with the tasks of placing sound Equipment at the N/N concerts. The N/N members control New Nirvana Ltd. thus, in law, it is the duty of Nuclear Blast Sounds Pty Ltd that the sound system must be place in such manner so that no injury is caused o the audience. The audience is the neighbor’s of Nuclear Blast Sounds Pty Ltd because they are the direct listeners of Nuclear Blast Sounds Pty Ltd and any wrongful action by Nuclear Blast Sounds Pty Ltd will directly impact the audience. Thus, the duty of care must be furnished by Nuclear Blast Sounds Pty Ltd against the audience.
But, this duty of care which must be catering by Nuclear Blast Sounds Pty Ltd is not by it. This is because the sound level that is set by Nuclear Blast Sounds Pty Ltd is very high. Nuclear Blast Sounds Pty Ltd should have kept the level at reasonable level so that no injury should be sustained by the audience.
But, because of the breach of duty by Nuclear Blast Sounds Pty Ltd, there were five audience members who suffered severe injuries of the nature that they is permanent hear loss. So damages are caused by Nuclear Blast Sounds Pty Ltd and which is direct and is not remote to predict.
Does not have insurance or other adequate means to pay to the losses of the audience, thus, by applying section 588V of the Act, the liability of Nuclear Blast Sounds Pty Ltd will be borne by New Nirvana Ltd
Conclusion
Nuclear Blast Sounds Pty Ltd is found to be negligent in its actions because the duty to provide adequate sound to the audience is violated which resulted in their loss. But, since Nuclear Blast Sounds Pty Ltd does not have adequate means to support the liability so under section 588V of the Act, the New Nirvana Ltd
Whether Millennium Pty Ltd is empowered to remove Don from the position of solicitor?
When a company is incorporated then the provisions of Corporation Act 2001 must be followed. If any company establishes its own constitution and decides to run by the same then it is authorized to enter into contract with its directors, secretary, members etc under section 140 of the Act. Now, if any such contract is violated by the company and because of such violation of contract if any members rights are terminated, then as per the rule laid down in Eley v Positive Life Assurance Co Ltd (1876), the members is empowered to sue the company for the breach of contract. But, if because of contractual breach there is no termination of member’s rights then there is no right that arises. If a company appoints a member of the company as its solicitor and later remove him from the said position but because of the removal from the post of the solicitor if there is no violation of members right then no action can be filed that the company is acting in contraction from its constitutional provision. The rights that accrue from the removal are not members rights but only contractual right. In Hickman v Kent or Romney Marsh Sheepbreeders Association (1915), it was established by the company that arbitration must be resort if any dispute arises amid the company constitution and any member. When the actual dispute arose the matter was submitted to the court and not to the arbitration. It was held that since the dispute is amid the member and the constitution, thus, the provisions of the constitution must be complied with and the dispute must first be referred to arbitration and not to the court and is held in (Rayfield v Hands (1960)).
The principles are now applied to the facts of the case.
There are three people, that is, Simon, Michael and Don, who together formulate a project management company called Millennium Pty Ltd and are the company members. They secure members rights in the company. Millennium Pty Ltd follows its constitution and its provisos are also binding upon its members. The Solicitor of the company (Don) was appointed and he was granted authority that he can purchase/sale lands. If any conflict arises then the same are resolved through arbitration. Later, Simon and Michael, replaced Don with some other solicitor.
Now, by applying the, it is submitted that when Don was removed from his position then his members rights are not infringed and so, there is only contractual breach and Don can cannot sue the other two members for his removal from the position of the solicitor under section 140 of the Act. Also, only dispute amid the member and the company is to be referred to arbitration, since the dispute is amid an employee and the company so dispute can be referred to court.
Conclusion
Thus, no member’s right of Don was breached when he was removed from his position as the solicitor. It is a contractual breach and he can go to court for dispute settlement as arbitration is only sought when the dispute is amid the member and the company.
Reference List
GV Puig (2000) A Two-Edged Sword: Salomon and the Separate Legal Entity Doctrine.
Norman k (2004) ‘Who then is law is my neighbour?” – Reverting to First Principles in the High Court of Australia. The Tort Law Review 12(2):pp. 85-97.
Ramsay & Noakes (2001) Piercing the Corporate Veil in Australia. (2001) 19 Company and Securities Law Journal 250-271.
Tomasic, R., Bottomley, S., & McQueen, R. (2002). Corporations law in Australia. Federation Press.
Annetts v Australian Stations Pty Limited (2002).
Bennett v Minister for Community Welfare (1992).
Donoghue v Stevenson (1932).
Eley v Positive Life Assurance Co Ltd (1876).
Gilford Motor Co Ltd v Horne [1933].
Hickman v Kent or Romney Marsh Sheepbreeders Association (1915).
Lee v Lee’s Air Farming Ltd [1960]
MacPherson v. Buick Motor Co. (1916).
Perre v Apand Pty Ltd (1999).
Rayfield v Hands (1960).
Salomon v Salomon & Co Ltd (1897).
ASIC (2016) Your business structure Choosing a business structure (online). Available at: https://asic.gov.au/for-business/your-business/your-business-structure/. [Accessed on 25th May 2017.
Incorporation. (2007). Investopedia. (Online). Available at: R https://www.investopedia.com/terms/i/incorporate.asp. Accessed on 25th May 2017.
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