Legal Rights of Peter in Sparkles Ltd

This assignment examines the legal rights of Peter, a shareholder and supplier to Sparkles Ltd., who is facing contractual breaches by the company directors. It analyzes relevant sections of the Corporation Act 2001, including provisions regarding injunctions (Section 1324), contracts within constitutions (Section 140), and remedies for oppressive conduct (Sections 232 & 233). The assignment concludes that Peter has grounds to seek legal remedies, such as an injunction and compensation, against Sparkles Ltd. for their actions.

Running head: BUSINESS LAWS
Business Laws
Name of the student
Name of the university
Author note

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BUSINESS LAWS
Issue
Determining the legal rights of peter
Rule
Section 1324 of the Corporation Act 2001 provides that the court can issue an injunction
against an action which has taken place in contravention of the CA by the directors of the
company. In addition the court may provide damages to the person who has made application for
such order along with or in substitution of the injection order.
In the case of Phoenix Constructions Queensland Pty Ltd v Coastline Constructions Pty
Ltd and McCracken [2011] QSC 167 the court had to determine the application of section 1324
of the CA which in summary states that a director of officer may be imposed with an injunction
if it is found that they have engaged or are planning to engage in an activity which is against the
provisions of the corporation act. In this case it was provided by the court that s182 of the CA
had been breached by the director by using his position in the company to bring detriment for the
company and gain personal advantage as the director did not allow to make the company get a
certain property under a joint venture for causing benefit to his wife.
According to section 140 of the CA if a company has a constitution or replaceable rules
which are effective on such company they have an effect of a contract between each member of
the company and the company itself, between every director and company secretary of the
company and the company itself, the members of the company with other members through
which every person is has an agreement to perform the rules and constitution as far as applicable

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on the person. In the case of Hickman v Kent or Romney Marsh Sheep-Breeders' Association
[1915] 1 Ch 881 it was ruled by the court that the members have the right to force the company
to abide by its constitution.
According to section 232 of the CA the court has the right to make an order in relation to
section 233 of the CA in case it is found that the affairs of the company in relation to a proposed
or actual omission or act in relation to the company or a proposed or taken resolution by
members, if they are not beneficial for the members of the company or unfairly prejudicial to,
oppressive to, or unfairly discriminatory against members or any member in the capacity.
As per section 233 of the CA the court may make an order against the company to be
wound up, repealing or modification to the existing constitution of the company, regulating the
future affairs of the company, prohibiting a person from doing a conduct or an act or to make a
person do or commit a particular act.
In the case of Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 the court
determined that they can take a wide view in relation to section 233 and 232 of the CA.
Application
In the given circumstances Peter is a member of Sparkles Ltd holding 5% of the shares in
the company. He has a right with the company for three years according to which he is to supply
stationary to the company. As provided by section 140 of the CA if a company has a
constitution or replaceable rules which are effective on such company they have an effect of a
contract between the member of the company and the company itself with respect to the rules of
such constitution. Therefore it can be provided that peter is in a contract with Sparkles Ltd to
supply them stationary for a period of three years. However such contracts have been violated by

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the directors of the company. Therefore as per the rules of section 1324 of the CA, peter can
make a claim for injunction against the company as it has violated section 140 of the CA. He
would not only be entitled to an injunction to provide restrict the contract being give to Office
Pax Ltd but also compensation for any loss suffered by him.
In addition he has the right to make a claim for oppressive remedy under section 232 of
the CA as the directors of the company are indulging in action which is not beneficial for the
interest of the company. This is because they are selling the assets of the company for an
undervalue or planning to do so which is a breach of section 233 of the CA.
Conclusion
Therefore Peter can claim remedy of preventing further violation of the section and
compensation for the loss incurred by the company under section 232 and 233 of the CA and an
injunction under section 1324 of the CA.

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Bibliography
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Corporation Act 2001 (Cth)
Hickman v Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 Ch 881
Phoenix Constructions Queensland Pty Ltd v Coastline Constructions Pty Ltd and McCracken
[2011] QSC 167