Business and Corporate Law Assignment: Legal Issues and Remedies

This document presents a comprehensive analysis of a business and corporate law assignment, addressing two distinct parts. Part A delves into contract law, examining the legal capacity of a minor (John) to enter into contracts for tools and shares, considering concepts like necessaries and beneficial contracts of service, and referencing key cases such as Chapple v Cooper and Proform Sports Management Ltd v Proactive Sports Management Ltd. Part B focuses on corporations law, specifically the rights of shareholders (Jacinta) and remedies against oppressive conduct by the company and its members, as per the Corporations Act 2001 (Cth). It explores issues of unfair discrimination, the application of section 232, 233 and 461 of the Act, and the potential for remedies such as compensation or winding up the company, referencing relevant cases such as Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services Pty Ltd.

Business and Corporate Law

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PART-A
I: Issue
Whether John can be legally enforced under the contract which he made to purchase the
tools? Whether John can legally claim the proceeds from the sale of shares? Whether
liquidator can legally enforce John under the contract?
R: Rule
One of the key elements of a valid contract is the capacity of the parties. As per this
element, a contract cannot be formed unless the parties of the contract are able to
construct a legal relationship with each other (Fitzpatrick et al., 2017). Thus, a person who
is insolvent, unsound mind or minor cannot form a legal relationship. A contract cannot
legally enforce a minor to comply with its terms. However, certain exceptions are present
regarding this rule. Under these exceptions, the legal relationship can be formed between
minor and third parties. The first exception is relating to the contracts that are constructed
for ‘necessaries’. As per this exception, a minor can form a contractual relationship for
necessaries. However, a major issue regarding what constitutes as necessaries was
addressed by the court in the case of Chapple v Cooper (1844) 153 ER 105. It was
established in this case that trading contracts could be repudiated as per the discretion of
the minor or they can be ratified after the minor becomes an adult. However, contracts for
necessaries can be constructed before that since they include elements that are crucial for
the existence of a person. These include food, clothing or transportation or other elements
that are important for a person to exist reasonably (Turner, 2013). Another relevant
element added by the court was that those things that are important for the cultivation of a
mind are also considered as necessaries.
As per this definition, art, trade, intellectual, moral, tools or religions factors that cultivate
the mind of a person are considered as necessaries. This definition was further exceeded
by the court by providing that luxury items cannot be considered as necessaries. However,
a relevant judgement was made in this regards in Roberts v Gray [1913] 1 KB 520. As per
the judgement of this case, contracts for education and other related services are valid
since they are considered as necessaries. Along with this exception, another circumstance
in which a minor can form a contractual relationship is ‘beneficial contracts of service’. It
was held by the court that these are relevant contracts since their purpose is to make sure
that the minor is able to support himself (Graw, 2012). These contracts also provide

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instructions, means or education to the minor that assist him in earning a living or engage
in a profession which is crucial for his growth. Thus, these contracts are considered as
valid by the court even when they are formed with a minor. In this regards, a relevant
judgement was made by the court in Proform Sports Management Ltd v Proactive Sports
Management Ltd [2007] 1 All ER 542. This is a relevant case because the court
established that trading contracts that are formed for the benefit of the minor are not
enforceable. While at the same time, the court provided in its ruling that beneficial contract
of service that is made with a minor for education or apprenticeship are valid and
enforceable (Fitzpatrick et al., 2017).
A: Application
There are three issues presented in this case involving the legal liability of John. Since
John is 16 years old, a contractual relationship cannot be formed between him and third
parties. The only contracts which he can form a contract for necessaries and beneficial
contract of service. The tools which he purchased can be considered as necessaries as
per the definition given under Chapple v Cooper since they are required for the cultivation
of the mind of John. Although John has left the course; however, the contract was formed
when he was enrolled for the course. Thus, it can be argued as per the judgement of
Roberts v Gray that John required those tools for the apprenticeship due to which he is
bound by the contract to purchase the tools.
The contract formed with the broker regarding purchase and sale of the shares of
AppTools is considered as a beneficial contract of service. This contract is valid unless it is
repudiated by John which means that it is voidable. Applying the principle provided in
Proform Sports Management Ltd v Proactive Sports Management Ltd, John has the option
to repudiate the contract, or he can comply with its provision due to which he has the
option to enforce the contract to receive the profits. In the case of the liquidator, the
contract formed between BuzzTools and John is voidable as per the discretion of John. He
has the right to enforce the contract or repudiate the same. Thus, the liquidator only has
the right to enforce John to pay for the share if John did not repudiate the contract and he
agreed to bind by the terms of the contract.
C: Conclusion
Based on the above observations, it can be concluded that the contract made by John for
purchase of tools is valid since it was made when John was enrolled for the apprenticeship
due to which the tools are considered as necessaries. The contract with the broker is a

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beneficial contract of service which is enforceable on the discretion of John due to which
he can enforce the contractual terms to claim the profits. The contract formed between
John and BuzzTools is voidable as well due to which the liquidator can only enforce John
to make the payment for shares if he did not repudiate the contract.

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References
Chapple v Cooper (1844) 153 ER 105
Fitzpatrick, J., Symes, C., Velijanovski, A. and Parker, D. (2017) Business and
Corporations Law. 3rd ed. Chatswood, NSW: LexisNexis Butterworths Australia.
Graw, S. (2012) An introduction to the law of contract. Toronto: Thomson Reuters.
Proform Sports Management Ltd v Proactive Sports Management Ltd [2007] 1 All ER 542
Roberts v Gray [1913] 1 KB 520
Turner, C. (2013) Contract law. Abingdon: Routledge.

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PART-B
I: Issue
Whether any remedies available for Jacinta under the Corporations Act against the
company and its members? What is her legal position and what actions can she take to
protect her interest?
R: Rule
The provisions regarding the protection of the interest of shareholders of a company are
given under the Corporations Act 2001 (Cth). This act recognises specific rights of
shareholders which are implemented to protect their interest. This act provides provisions
regarding oppressive conduct of affair by an enterprise and recognises rights of
shareholders. These rights are identified under section 232 to 235 to protect the interest of
minority shareholders by providing them remedies against oppressive conduct (Fitzpatrick
et al., 2017). This act provides power to the court to intervene with a company’s operations
under section 232. This intervention is made to stop any actions that could be considered
as oppressive and against the interest of shareholders. The act did not give a definition of
the term ‘oppressive’; however, it can understand by judicial interpretations. It is defined as
unfair discrimination or prejudice against a shareholder or group of shareholders in a
company. Through this section, the provisions are implemented for the protection of the
interest of minority shareholders by protecting them from the exploitation of majority
shareholders. Still, there are various limits to the application of this rule. For instance, it
cannot be applied by the court if the shareholder or a group of shareholders are
dissatisfied by the company or its actions (Schultz, 2016). Thus, certain provisions must be
available to ensure that the actions taken by the members are considered as oppressive
conduct.
It is important that a person who is applying for the remedy against oppressive conduct
under section 234 must be a shareholder, former member or an appropriate person as per
the decision of the Australian Securities and Investments Commission (ASIC). After
determining the validity of the member, the validity of the ground for this the suit is filed is
determined. These are three grounds as given under section 232: conduct of a company’s
affair, act or omission and resolution or proposed resolution. The claim of a party is
analysed on these grounds while relying on an objective test by the court to determine
whether they are considered as unfairly discriminatory or prejudicial (Chng, 2015). Section

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232 (e) provides specific provisions regarding the application of the objective test. It
provides that the actions must be considered as wrongful, burdensome or harsh to
consider as oppressive. The provisions regarding remedies are given under section 233
(1). As per this section, the court can issue an order for remedy by winding up the
company, regulating its affairs, order to purchase shares of the member, directing the
company, restraining its members from engaging in particular conduct or modifying or
repealing its constitution (Austlii, 2019).
While applying these provisions, the judgement given under Shamsallah Holdings Pty Ltd
v CBD Refrigeration and Airconditioning Services Pty Ltd (2001) 19 ACLC 517 is important
to be analysed. A claim was made in this case under section 232 and 233. It was stated
that the director of the company is prohibiting the members from receiving dividend even
after the availability of profit and restraining them from access the records of the company.
While at the same time, the director was giving himself a high salary package. The court
provided its judgement in favour of the shareholders by stating that the actions of the
director come within the definition of oppressive conduct (Jade, 2001). Another relevant
judgement in this regards was given by the court in Re G Jeffrey (Mens Store) Pty Ltd
(1984) 2 ACLC 421. It was established in its case that the remedy for oppressive conduct
could not be given if the shareholders are merely dissatisfied by the company or its
actions. Furthermore, section 461 (1) provides a drastic remedy for oppressive conduct.
The court can issue a judgement to wind-up a company on the grounds given under
section 232 in order to eliminate oppressive conduct under section 461 (1) (Fitzpatrick et
al., 2017).
A: Application
The issue is presented in relation to the legal position of Jacinta and her rights under the
Corporations Act. The right of Jacinta to access the books of the company is not breached
in this case. However, she can make a claim under section 232 for oppressive conduct.
The actions taken by Bill in the company can be considered as unfairly discriminatory or
prejudicial. These decisions resulted in violating the interest of other shareholders such as
Jacinta. She can claim that the grounds given under section 232 for application are
present in this case. The majority shareholders are acting in an oppressive manner by
restricting the shareholders from receiving dividends even when the company is
continuously generating profits for the last four years. The facts of this case are similar to
the facts of Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services
Pty Ltd can also be applied in this case.

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Since the majority shareholders are not giving dividends to Jacinta and other
shareholders, their actions are considered as unfairly prejudicial and discriminatory. A suit
can be filed by Jacinta to claim a remedy under section 233. She can claim for
compensation or request the court to pass an order for other shareholders to buy her out
the company. Furthermore, the decision of Bill to not issue shares to Jacinta and Yvette
during the restructuring of the company is considered as oppressive conduct. Since they
are discriminatory against the minority shareholders, Jacinta can claim remedy under
section 461 (1). The court can issue an order under this section to wind-up the company to
eliminate the issue of oppressive conduct and provide a remedy to minority shareholders.
C: Conclusion
Based on the above observations, it can be concluded that Jacinta can make a claim
under section 232 against the company and its majority shareholders. Their actions come
within the scope of oppressive conduct; thus, Jacinta can claim a remedy under section
233. She can claim compensation or buy-out. She can also request for the wind-up of the
company as a remedy under section 461 (1) because she and Yvette were purposefully
excluded from receiving shares when the decision of restricting of the company was made.

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References
Austlii. (2019) Corporations Act 2001. [Online] Available from:
http://www.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/ca2001172/ [Accessed on
26th April 2019].
Chng, W.Y.K. (2015) Breach of agreement versus vexatious, oppressive and
unconscionable conduct: Clarifying their relationship in the law of anti-suit
injunctions. SAcLJ, 27, p.340.
Fitzpatrick, J., Symes, C., Velijanovski, A. and Parker, D. (2017) Business and
Corporations Law. 3rd ed. Chatswood, NSW: LexisNexis Butterworths Australia.
Jade. (2001) Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning
Services Pty Ltd. [Online] Available from: https://jade.io/j/?a=outline&id=144450 [Accessed
on 26th April 2019].
Re G Jeffrey (Mens Store) Pty Ltd (1984) 2 ACLC 421
Schultz, A. (2016) Finding the Right Remedy in Minority Shareholder Oppression Law: A
Transnational Analysis of Solutions in Closely Held Corporations. Transnat'l L. & Contemp.
Probs., 26, p.499.
Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services Pty Ltd
(2001) 19 ACLC 517