Legal Issues and Relevant Laws in Business: Case Studies

This document contains three case studies related to legal issues and relevant laws in business. The first case study discusses whether Bob has violated any legal provisions by doubling his catch with the help of company incorporation. The second case study explores whether New Nirvana Ltd can be held accountable for the losses inflicted by Nuclear Blast Sounds Pty Ltd due to their negligent acts. The third case study examines whether Don has any right to sue Millennium Pty Ltd for his removal from the post of solicitor of the company. The document provides relevant laws, their application, and conclusions for each case study.

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Contents
Solution 1....................................................................................................................................................2
Issue........................................................................................................................................................2
Relevant Law...........................................................................................................................................2
Application of law...................................................................................................................................3
Conclusion...............................................................................................................................................3
Solution 2....................................................................................................................................................3
Issue........................................................................................................................................................3
Relevant Law...........................................................................................................................................4
Application of law...................................................................................................................................5
Conclusion...............................................................................................................................................6
Solution 3....................................................................................................................................................6
Issue........................................................................................................................................................6
Relevant Law...........................................................................................................................................6
Application of law...................................................................................................................................6
Conclusion...............................................................................................................................................7
Reference List.............................................................................................................................................8

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Solution 1
Issue
Whether Bob by doubling his catch with the help of company incorporation has violated any
legal provisions?
Relevant Law
If any person intends to establish a business, then, one of the forms is the formation of a
company. Section 124 of the Corporation Act 2001 submits that when a company is
incorporated, then, it is an artificial being and is regarded as an artificial person. This legal
provision was initially highlighted Salomon v Salomon & Co Ltd (1897) wherein the Court of
Appeal submitted that once a business is registered as a company then it gains the position of a
being with no soul and mind and thus requires officers for its working. Directors are the prime
officers who are associated with the working of the company as held in section 198A of the 2001
Act. In Lee v Lee's Air Farming Ltd [1960] the court held that a company with single share
holder and director is distinct from the company. The company has a separate legal existence and
the acts that are taken by the directors of the company on behalf of the company will only bind
the company and there is a veil that brings a distinction amid the company and its officers. A
company has the capacity to enter into contractual relationship, to buy and sold property, etc.
Peate v Federal Commissioner of Taxation (1964), the courts held that when the directors is
acting for the company then there is no personal obligations that can be imposed on such
directors and the shareholders are only liable to the dents of the company which is equivalent to
their shareholdings. (Ramsay & Noakes 2001)
Now, this distinction amid the officers and the company itself is made with the help of a veil.
Many a times, the courts are not found reluctant to disregard the presence of veil that brings a
distinction amid the officers and the company. When there is incurrence of fraud on the part of
the company officers, then in Gilford Motor Co Ltd v Horne [1933] the veil is pierced by the
courts and the acts of the officers are not considered to be the company acts and the directors are
held to be personally liable for the same. In Dennis Willcox Pty Ltd v Federal Commissioner of
Taxation (1988) the court held that any incurrence of fraud to take benefit of the separate legal
entity principle is not regarded by the court as court and the courts has lifted the veil and the
directors are considered to be solely liable for such actions. (GV Puig, 2000)

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Application of law
IN new South Wales , Bob is indulged in the business of fishing. The scallops in the water are
limited and to safeguard them two legislations are framed according to which any interested
person must first apply for a quota which can make him eligible to fish 50 tonnes of scallops in a
year AND if any person wish to sell the scallops then he can only sell them to the Scallops
Marketing Authority. If these laws are violated then $100,000 is imposed as fine.
It is submitted that BOB has violated these provisions because:
i. Bob ha applied to quota and thus he is allowed to fish 50 tonnes of scallops on a year.
ii. With an intention to double the scallops he formulated a company and applied for a
separate quota.
iii. The company by Bob is separate by applying Salomon v Salomon & Co Ltd and thus
the company and Bob can only their personal basis can apply for their respective
quotas;
iv. But, the acts of Bob while incorporating the company was fraud as he was the only
shareholder and director of the company and the incorporation is to bypass the
legislation;
v. Thus, as per Gilford Motor fraud is incurred and the veil is pierced.
The court can disregard the presence of the company as a separate entity and the acts of company
should be considered to be the acts of Bob.
Conclusion
So, the company made by Bob was to incur fraud and to bypass the legislations framed. So, the
acts of the company should be considered as the acts of Bob and he can be imprison with fine
of$100,000.
Solution 2
Issue
Can New Nirvana Ltd be held accountable to the losses that are inflicted by Nuclear Blast
Sounds Pty Lt because of their negligent acts?

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Relevant Law
The law of negligence is an important branch of the law of tort which emphasis that no person
should indulge in any acts or inactions which has the capacity to cause any injury to the plaintiff.
In Donoghue v Stevenson (1932), Lord Atkin has emphasized that every manufacturer is duty
bound to provide protection to the plaintiff who is his neighbor. If any defendant is considered to
be negligent, then, there are three basic requirements. (Plunkett 2018)
The first requirement is that the defendant is under a legal duty of care. The duty of care
emphasis that when the defendant is undergoing any activity then it is his prime responsibly to
make sure that because of his activity no harm is caused to the aggrieved party. This duty is not
catered against every other person, but, the aggrieved party should be the, first, neighbor of the
defendant who implies that there is nearness, closeness and proximity between the two, that is,
the acts of the defendant will hamper the plaintiff and is analyzed is MacPherson v. Buick Motor
Co. (1916).; secondly, that the plaintiff is reasonably foreseeable, that is, the defendant can
foresee that the plaintiff is present and thus the defendant should carry out his acts in careful
manner so that no loss is caused to the plaintiff and is analyzed in Perre v Apand Pty Ltd (1999).
(Plunkett 2018)
Secondly, the duty which a defendant should comply with is not met. The non compliance of
duty is breach on the part of the defendant. The breach is incurred when the level of care
expected from defendant in any given situation is not met. The level of care differentiates, that is,
high degree of care is required when the chances of injury are high or when the plaintiff is an old
person or a child and is held in Bennett v Minister for Community Welfare (1992). (Plunkett
2018)
Lastly, when the duty of care which a defendant should comply with is not met, then, in order to
consider him negligent in his actions, it is very necessary that there is some loss that is caused to
him and is held in Annetts v Australian Stations Pty Limited (2002). But, the defendant is
answerable for those losses which he can foresee reasonably and are not remote. Loss which are
not in the vision of the defendant are not imposed upon him and is held in Bolton
v. Stone [1951]. Further, the loss is the result of the breach on the part of the defendant. So there
is presence of causation and is held in Chappel v Hart (1998). (Plunkett 2018)

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When these elements are met then the defendant is negligent.
As per section 588V of the 2001 Act, when any subsidiary is negligent but is not financial stable
to meet the liabilities caused to the plaintiff then, the liability is imposed on its parent company
and the plaintiff an recover their loss from the parent company.
Application of law
There are two companies, Nuclear Blast Sounds Pty Ltd (NBSPL) and New Nirvana Ltd (NNL).
NBSPL is the subsidiary of NNL. NNL has given tasks to NBSPL that it should place the
equipments of sound at the N/N concerts. NNL is controlled by the members of N/N.
So, when NBSPL is carrying out its tasks then it must make sure that because of its acts no loss
or harm is caused at the concert, that is, to the people (audience) who are present there. The duty
of care exists because NBSPL is providing services at N/N concert and it is reasonably
foreseeable that people (audience) will be present and such audience is close with and is affected
by services of NBSPL. So, there is presence of proximity. Thus, there is an element of duty of
care that is enshrined on NBSPL.
However, NBSPL fall short of the duty of care that is expected from it. NBSPL has set the level
of the sound which was so high that it caused harm to the audience. It is the responsibly of
NBSOL to make sure that adequate volume of sound should be generated so that it does not
harm the people present. But, the sound is very high as what a reasonable man would expect in
the situation. Thus, there is breach of duty.
When the duty is breached, then, because of such high volume there were 5 people who are not
able to hear again. The loss to the people is because of the acts of NBSPL and the loss is
reasonably anticipated by NBSPL. So, there is incurrence of damage.
So, NBSPL is liable.
But, since NBSPL has neither have insurance nor have money thus as per section 588V, NNL
will assume the liability of NBSPL and will pay the audience.

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Conclusion
NBSPL is negligent but have not enough financial resources to pay the plaintiffs, thus, the
liability will shift to NNL and it is now NNL that will compensate to the victim.
Solution 3
Issue
Whether DON has any right to sue Millennium Pty Ltd for his removal from the post of the
solicitor of the company?
Relevant Law
As per section 124 of 2001 Act, once a company is formulated, then, it is a separate legal entity
in law. A company has the capacity to run by constitution or by replaceable rules or by both.
Since a company is an artificial person thus it requires officers, members and employees for its
working As per section 140 of the Act, any company when rules as per its constitution, then any
contract with any member is made in the personal capacity of the company and thus such
contract are enforceable amid the company and such members. If the company is not carrying
out its contractual obligations, then, the aggrieved member has every right to sue the company
but it is held in Eley v Positive Life Assurance Co Ltd (1876), that the member is permitted to sue
the company only when the member’s rights are violated. If there is no violation of the members
rights, then, the aggrieved member cannot bring any action against the company under section
1400 of the Act. If a solicitor is removed, then, such removal if does not hamper the rights being
a member then there is no action that can be bought under section 140 of the 2001 Act. (Ramsay
& Noakes 2001)
Application of law
Simon, Michael and Don are incorporated Millennium Pty Ltd. they are the members of the
company. The company is run by the constitution. Don is places as the solicitor of the
Millennium Pty Ltd. the constitution submit that of any dispute is incurred then arbitration
should be sought. He is authorized to make contracts on behalf of the company dealing with
purchase and sale of lands. Don was removed from his position and a conflict is incurred.
Don is the solicitor of the company and he is not the member of the company. He is only allowed
t seek the remedy of section 140 when any of his members rights are violated by the company,

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the removal from the post of solicitor is a contractual breach by the company and not any
violation of his members rights. Thus, he cannot sue the company but can go for arbitration for
the settlement of the dispute.
Conclusion
Do removal is only the violation of his contract with the company and thus no action can be
bought against the company by applying section 140 of the Corporation Act. the only resort is to
seek the process of arbitration.

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Reference List
Books/Journals/Articles
GV, P 2000, A Two-Edged Sword: Salomon and the Separate Legal Entity Doctrine.
Plunkett, J 2018, The Duty of Care in Negligence, Bloomsbury Publishing.
Ramsay, I & Noakes, D 2001, Piercing the Corporate Veil in Australia. (2001) 19 Company and
Securities Law Journal 250-271.
Case law
Annetts v Australian Stations Pty Limited (2002).
Bennett v Minister for Community Welfare (1992).
Bolton v. Stone [1951] AC 850;
Chappel v Hart (1998) 156 ALR 517
Donoghue v Stevenson (1932).
Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988)
Eley v Positive Life Assurance Co Ltd (1876).
Gilford Motor Co Ltd v Horne [1933].
Lee v Lee's Air Farming Ltd [1960]
MacPherson v. Buick Motor Co. (1916).
Perre v Apand Pty Ltd (1999).
Peate v Federal Commissioner of Taxation (1964)
Salomon v Salomon & Co Ltd (1897).