Business and Corporation Law

This article discusses the issues, rules, and application of business and corporation law. It covers topics such as contract law, misrepresentation, and company types. The case of Shaddock & Associates Pty Ltd v Parramatta City Council is also analyzed. The article concludes with a discussion on the requirements for a small proprietary company and the restrictions on company names.

Running Head: BUSINESS AND CORPORATION LAW 0
Business and Corporation Law
4/16/2019
Student’s Name
Word Count
Part A – 1016 words
Part B- 962 Words

Business and Corporate Law
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Contents
Part A...............................................................................................................................................2
Issue 2
Rules 2
Application 4
Conclusion 5
Bibliography....................................................................................................................................6
Case Laws 6
Books/Journals 6
Part B...............................................................................................................................................7
Issue 7
Rules 7
Application 9
Conclusion 10
Bibliography..................................................................................................................................11
Legislations 11
Books/Journals 11
Other Resources 11

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Part A
Issue
The issue of the case is to check the right of Alex in against of the vendor, the city of
Williamstown and his lawyer?
Rules
A contract is an agreement, which is legally binding to the signing parties of the same. Under a
valid contract, both of the parties are required to perform their promises1. For a valid contract,
certain elements are required to be there. Free consent is one of them. It means in a contract the
consent of the parties should not be influenced by any of the factors such as fraud,
misrepresentation, undue influence, unconscionable conduct and so on. Misrepresentation can be
understood as a false statement, which induces the representee to develop a contract. Such a
statement can be related to a fact or a law. Mainly three types of misrepresentations are there
namely fraudulent misrepresentation, innocent misrepresentation, and negligent
misrepresentation2. The categorization of misrepresentation is required because all of them
provide a different remedy to the victim. To be in successful in the claim of misrepresentation,
certain factors are required to be there. The very first factor is a false statement. For every kind
of misrepresentation, a false statement of law or fact must be there. The other factor is reliance.
The victim/offeree must have a reliance on the misstatement made by another party. Further
misstatement/misrepresentation must induce the victim to enter into the contract3. When both of
the conditions are satisfied, the next question arises regarding the type of misrepresentation. As
1 Jeffrey Frederick Fitzpatrick et al, Business and Corporations Law, 3rd Edition (LexisNexis Butterworths, 3rd ed,
2016).
2 Popov Danica. ‘The misrepresentation as a reason of rescission of contract.’ (2013) Zbornik Radova 47.
3 David Wright, Using Commercial Contracts: A Practical Guide for Engineers and Project Managers (John Wiley
& Sons 2016) 88.

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mentioned above three types of misrepresentation are there that provides different remedies.
Negligent misrepresentation is one of the significant out of them. As the name implies a
negligent misrepresentation is a statement that a party makes without having proper grounds for
belief in its truth. In such a situation the representor has to prove that, the same had reasonable
grounds to believe on the fact and the statement was made because of such belief. It means this
kind of misrepresentation occurs when a party negligently presents a false statement to other
party and other party believing on such statement enters into a contract4. For the existence of
negligent misrepresentation, there must be a special relationship between the parties. Further,
because of such relationship, the misrepresentor must owe a fiduciary duty to misrepresentee.
The person making misrepresentation must have an assumption of responsibility. An assumption
of responsibility is those cases where the person who makes the statement is the expert of a
particular area of knowledge.
The facts and decision of the case of Shaddock & Associates Pty Ltd v Parramatta City Council
5are necessary to discuss here. In this, case the claimant Shaddock & Associates wanted to buy a
property in the council governed area. The solicitor of claimant asked the council about the
prospective proposal and the council confirmed that no proposal was there. Council made this
statement negligently and later on because of some proposals, the value of the property
purchased by claimant reduced to a level. The claimant claimed that they have believed on the
statement made by the council and therefore purchased the property. It the misstatement by the
council was not there then no loss would have happened to them. In the decision of this case, the
court provided judgment in the favor of the claimant and made the council liable for negligent
misstatement. The decision of this case established that in those cases where the person having
4 Mark P. Gergen, ‘Negligent Misrepresentation as Contract’ (2013) California Law Review 101, 4.
5 Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225

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some expertise has knowledge that the other person is acting based on their advice, then a duty of
care arises. This duty gives rise to the claim of negligent misstatement if the provided advice has
no reasonable grounds to believe on. Remedies for negligent misrepresentation are the same as
fraudulent misrepresentation. The innocent party can rescind the contract. In addition to this, the
same can also ask for the damages from the party liable to make a misrepresentation.
Application
In the presented case, Alex purchased a property and entered into a contract of sale with the
vendor of this property. As per the planning certificate attached with this contract, the land was
marked as medium density. Alex wanted to develop 10 apartments and to subdivide them
following their sell. As per the terms stated under the subjective contract, Alex had the right to
initiate development on the same. As Alex was keen to commence the construction, he did not
inform his solicitor that the work has begun. After a few months during the usual searches, Alex
found a new planning certificate. According to this certificate, the land purchased by Alex was of
a residential zone. It means Alex could not develop the 10 apartments on the same by doing
subdivision.
Here this is to state that four parties are involved namely, Alex, his solicitor, a vendor of land
and City of Williamstown, the council which issues two of the subjective planning certificate.
The vendor of the land did not make any misrepresentation here but the City of Williamstown
did. Here the council was an expert of the matter and the same was aware with the fact that the
purchaser of the land will purchase the land on the belief of the planning certificate. In such a
situation, the council owed a duty of care to the purchaser of land. Nevertheless, a miss
representation was there because of the existence of a false statement that induced Alex to enter
into a contract. The misrepresentation made by the council will be treated as negligent

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misrepresentation as the council did not make it fraudulently but had no reasonable belief that
the same was true. Applying the provisions of Shaddock & Associates Pty Ltd v Parramatta City
Council, Alex can rescind the contract and also can ask. Further, the solicitor cannot be held
liable for the same as he was acting in a professional capacity and Alex did not inform him about
the commencement of construction work.
Conclusion
Alex had right against of the City of Williamstown only as this council made a fraudulent
misrepresentation. The vendor and the solicitor were fair in their dealings.

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Bibliography
Case Laws
Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Books/Journals
Fitzpatrick, Jeffrey Frederick et al, Business and Corporations Law, 3rd Edition (LexisNexis
Butterworths, 3rd ed, 2016).
Gergen, Mark P. ‘Negligent Misrepresentation as Contract’ (2013) California Law Review 101
Popov Danica. ‘The misrepresentation as a reason of rescission of contract.’ (2013) Zbornik
Radova 47.
Wright, David Using Commercial Contracts: A Practical Guide for Engineers and Project
Managers (John Wiley & Sons 2016) 88.

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Part B
Issue
The issue of the case is to check and determine the
 Type of company that should apply to ASIC in this case
 Category of the company in its first year of business
 Whether the company will be in the same category even after 5 years of its working
 Can the company includes words such as ‘Anzac Coffee’ in its name
Rules
Mainly two types of companies are there based on their ownership and controlling level. Such
companies include proprietary and public companies. There are subcategories of public
companies namely no Liability Company, a company limited by shares, a company limited by
guarantee, and unlimited liability company. Further proprietary company also has two types,
which are Proprietary companies limited by shares and unlimited proprietary companies with a
share capital6. The lead difference between the proprietary and public company is that the, unlike
the public company, the proprietary company cannot raise funds from the public in the form of
capital. The level of legal requirements is high for public companies, as the same has to comply
with many requirements such as lodgment of annual reports, reporting and disclosure
requirement and many others. Proprietary companies do not have to do this. Corporations Act
20017 is the main legislation, which governs the companies in Australia. As per the section 45A
6 Ecompanies.com.au, Australian companies by type (Web Page) < https://www.ecompanies.com.au/company-
registration/resources/different-types-of-companies/>.
7 Corporations Act 2001 (Cth)

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of this act, the proprietary company can be a small proprietary company or large proprietary
company based on the size of assets, amount of revenue and number of employees. Subsection 2
of section 45A says that a proprietary company is considered as a small proprietary company if
the same satisfy two of the following requirements for a financial year:-
 For the financial year, the consolidated gross operating revenue is less than $10 million
8At the end of the financial year the value of the consolidated gross assets is less than $5
million
 At the end of the financial year, the number of employees is less than 509
As per Subsection 3 of section 45A, a company is termed as a large proprietary company if the
same breaches 2 or more condition mentioned above. Subsection 5 of the subjective section says
that for the purpose of calculation of the number of employees, both part-time and full-time
employees will be included10. The promoter may take any name for their company but the same
should not be the one, which is restricted by the Australian Securities and Investment
Commission (hereinafter referred to as ASIC). There are certain words and phrases use of that is
restricted. People have to take prior consent of ASIC before using these words. Such words
include royal, trust, chamber of commerce and similar other words which gives a presumption of
involvement of government. One may check the availability of the same before applying for the
same using the ASIC website. This website shows three colors for a different type of names.
Green color shows that the name is available for the formation of the company without any
restriction. The amber color shows that the names may be available but for the same one has to
8 Australia, Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC Act 2001, related
regulations (CCH Australia Limited, 2011) 149.
9 Austlii.edu.au, Corporations Act 2001 - SECT 45A (Web Page) <
http://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s45a.html>.
10 Legislation.gov.au, Corporations Act 2001 (Web Page) <https://www.legislation.gov.au/Details/C2015C00336>.

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take prior permission of ASIC and then only one can form a company using the respective
words. At last, the words, which show that red color, are the sign that the same is restricted and
one may not form a company with those words in any situation. In addition to this, one cannot
select a name, which is already registered for a different business. In other words to say there
cannot be two companies with the same name.
Application
After reviewing the fact of the situation, a proprietary company seems good to be incorporated.
Directors and officers of the company would have to follow a few requirements. Not so many
disclosures will require to present. In addition to this, the cost of incorporation will also be less.
As given in the problem situation, the company shall only consist of family members; this is
possible in case of the proprietary company only. The company is expected to have only 20
employees, gross assets of $5million and gross revenue of $10 million during its first financial
year. Applying the provisions of section 45A (2), the company will be treated as a small
proprietary company as it fulfills all the conditions mentioned in this section. During the next
five year, the category of the company seems to change. The assetss size of the company will be
to $13 million and revenue of $26 million. This crosses the limit mentioned under 45A (2). The
number of employees will also be 71 employees (including 66 part-time employees) which are
outside of the limit stated under section 45A (2) and therefore the company will become large
proprietary company under section 45A (3) of the act.
Moving the discussion towards the name of the company, this is to say that this requires prior
approval of ASIC. It somewhere shows that company has some relationship with the government
of Australia and New Zealand. This name can mislead the people; nevertheless, the same is not
restricted. Therefore ASIC may grant it if think so. It means firstly the name is required to apply

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to ASIC and then if ASIC would think it reasonable and appropriate, then the same will provide
the approval. Only then after company can be formed using this name.
Conclusion
This is to conclude that a proprietary company is required to register in this case and during the
first year, the same will be categorized as a small proprietary company. At a period of five years,
the category of the company will be change to the large proprietary company. The word ‘Anzac
Coffee’ can be used in the name of the company but for the same prior consent of ASIC will be
required.

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Bibliography
Legislations
Corporations Act 2001 (Cth)
Books/Journals
Australia, Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC
Act 2001, related regulations (CCH Australia Limited, 2011)
Other Resources
Austlii.edu.au, Corporations Act 2001 - SECT 45A (Web Page) <
http://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s45a.html>.
Ecompanies.com.au, Australian companies by type (web page) <
https://www.ecompanies.com.au/company-registration/resources/different-types-of-companies/>.