Legal Issues and Relevant Laws in Business: Case Studies

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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?