AUT LAWS641 Semester 1: Business Organizations Law Assignment

This document presents a comprehensive solution to a Business Organizations Law assignment (LAWS641) from AUT, Semester 1, 2019. The assignment addresses five key questions. Question 1 examines a partnership's tort liability and Jane's position as a salaried partner, referencing the Partnership Act 1908. Question 2 explores the concept of legal personality and corporate veil, citing relevant sections of the Companies Act 1993 and case law. Question 3 focuses on the liabilities of Ms. Brown as an occupier in a commercial lease. Question 4 deals with the powers and rights of directors Alina and Pete regarding share distribution, referencing the Companies Act. Question 5 is broken down into 3 parts that examine the concept of directors and the agency by estoppels. The solution provides detailed analysis, case citations, and statutory references to address each issue comprehensively.

Question 1
Issue
 Jane is in a legal partnership is entitled to get relief according to the liability in the
Partnership Act.
 What would be her position in relation to the tort liability $ 1.5 million which was created
by one of her partners of partnership?
Rule
Partnership Act 1908, Section 13, 14, 15, 20(1)
Application
The giving of advice to a client is that the client is liable under the Partnership liability. The fact
of Jane being a partner cannot be denied. Harry committed a lapse in which the partners in a
partnership have to face sued in tort for $1.5 million. But the relationship between members of a
company, association, should be registered in a company under the Companies Act 19931.
The liability will be considered as one for all the partners. (Sc.13). When money is received
through business from the third party and is misapplied by one of the co-partners in the authority
of the firm, it is a failure for the firm. (Sc.14) here Harry is the one who made a big mistake as a
result got sued in tort liability for $ 1.5 million2.
Every co-partner is jointly or is considered as one and for all the happenings with the firm only if
the person is a partner (S15).
If a person confesses to being a partner in a particular firm is not liable of anything which
happened before the person becoming a partner or the one who the person is retired from the
firm, only if the members agreed is not liable for any wrongly acts (Sc.20)3.
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2
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Case
Harvey v. Harvey (1970) 120 CLR 529
It states that all the shares of profit are distributed so is the losses. All the partners are liable for
the loss of the company together in the same principle as before. The court had fixed a certain
amount for the reason of improving.
Conclusion
Jane is equally liable in this case. It's clarified that partner will act equally as one in losses or in
gain. The serious mistake regarding the amount in the custody of the firm was made by Harry he
is also a co-partner of the firm. The same action would be taken with Jane along with her co-
partners by the court4.
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Question 2
Issue: The question is regarding the concept of legal personality.
Legislation
Companies Act, 1993, Sec. 21, Sec. 22 & Sec.25.
Sec.21 CA Act 1993 states that it should end with limited. One should not break rules and
regulations and should not keep the similar name of another company.
Sec.25 The name should be written clearly in the written statement or wherever it is needed.
Fraud, Sham, Breach of public policy:
Lee v. Lee’s Air Farming Ltd [1961] NZCR 325 (PC)
Lee was held as a separate or different distinct entity by Privy Council from company. He was an
employee of the company and because of that reason, his wife has the liability to ask for the
compensation amount which is her right after her husband’s death.
Elevating the large company veil:
Solomon v.A Solomon &co. ltd”-1987A.C 22 (HL).
The Salomon principle provides the essentials of a legal person’s separationof obligations and
rights of the company to the entitlements and obligations of the shareholders and directors to the
employees and agents.
Conclusion
Corporate personality is the fact that states the company’s law which is recognized as a member
or a legally distinct. A company with such character develops an independent legal existence
which separates from its directors, shareholders, creators, and officers. This whole is known as

“Veil incorporation”. It’s a poetic term given by its shareholders and members to this separation
of company5.
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Question 3
Issue: Ms. Brown is an occupier in behalf of the company.
Law
Sec. 180 Company law Act, it states about a natural person may or may not by law enters into an
obligation requires in writing to enter into an agreement on behalf of the company. It should be
under the implied and express authority.
Sec. 105, Body company functioning rules and regulations.
Application
The tenant is liable to the owner who remains responsible to the company and other part of
owner under a certain act. The residential tenant Act does not apply here in the commercial lease.
Here the tenant is a unit title development andacts accordingly to the company rules. If a tenant
has any issues regarding the company or the occupier; they must first communicate with the
owner and resolve the issue as soon as possible. Tenants are prohibited to do anything apart from
the lease agreement which may cause a breach to the agreement as there are certain rights and
the duties.
A right of renewal of lease is granted to the tenant in whom a tenant can seek a court to force the
landlord to the acceptance of renewal. A lease is a legal agreement or a legal binding, wherethe
property owner, i.e. the landlord and the tenant must honour. A deed of the contract is a
document which is for both the parties whether it is a landlord, or a tenant has rights and
obligations. Section 6
A landlord is not allowed to break the terms of lease without any specific reason and the terms of
one or less and start no later than twenty of working days after the agreement is made. And if the
landlord still wishes to terminate the duration of the lease, then the tenant has the right to
complain about a bureau of local landlord-tenant or to a small claim court

Case:
Bank of NZ V. Fiberi Pty Ltd.
The Bank of NZ created an assurance from the company to secure the indebtedness of both the
companies. The assurance was not satisfied by the property which was kept as a guarantee.
Therefore, the Bank of New Zealand was not qualified for possession.
Conclusion
Ms. Brown is only anoccupier.Mr. White has no right to ask for the property from M. Brown
since the lease agreement was between Ajax Ltd and Mr. White.

Question 4
Issue: Alina and Pete are the directors and the Shareholders of Cool Reads Ltd, business as a
book retailer. As a board of director, they have the powers and rights to attach to the shares6.
Rule
The Company Act is applicable:
Sec.52 Board has power of distribution.
Sec.53, an amount which is regularly paid through company to make interest or financial gain
more than its capital apart from the administration with respect to which Acts applies.
Sec4(2) The worth of property for the company and its worth of the company’s responsibility
inclusive of its contingent liabilities.
Sec 4(4) the worth of the contingent liability: The probability of the contingent to take place.
Claims of the company are qualified to create and to be rationally expected the requirements to
reduce to put out in contingent responsibility.
Application
Here the previous or recent years’ financial statement of the company is being considered in
which the entitlement of other laws isconsidered. The financial profit and loss record of the
company is being considered. It also observes the assets and liabilities. The payment is only
given if it meets the requirement as under section 52.
Case
Kitchener Nominees Ltd V. James Product Ltd (2002) 9 NZCLC 262, 882.
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They had liquidity issues then the managing director was unable to meet the third installment.
Here Sc. 52(3) of CA 1993 was applied whether it fulfills the requirement of the board to satisfy
the solvency test to pay distribution.
Judgment: The decision of the legislation stated that the right to cancel the retrospectively is
clear evidence of policy, the shareholder was no more entitled to use the profit payments of the
company to creditors outside at time of solvent.
Conclusion
In case of Alina and Pete, it does not satisfy the requirements to the property of the declared
dividend because the profit is not a salary which can be casually claimed. It is a payment a
company makes to its shareholders, directors, members, and creators if it has made a profit.
Cool Read Ltd was not making any profit instead of making a profit they were unable to pay
their rent and supplier7.
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Question 5
a.
Issue: The facts are regarding the concept of director in which it can be a purchaser or not.
Laws: The agency by estoppels is applied.
Application:
In agency it is known that only one party can act on behalf of another has the authority to make
the contractual relationship binding among the parties. The relation arises by the situation which
is created by the parties which are known as the implied agreement. The intuition conducted by
the principal to the third party to which the agent been given power is Estoppel. In this case, the
Agency by Estoppel rule is applied where there are three parties.
Conclusion:
Since no one holds the position of managing director, and the business is of both the cousin and
both acting as a director and shares equal rights but the business all affair is taken cared by
Simon ashe usesto decide on running the business on his own. The Statutory duties in Company
Act 1993and the Agency by Estoppel states the same.
b.
Issue: Debra and Simon signed the agreement of purchase as the director.
Law:
Sec. 180 (c) Companies Act, 1993,
Application:

A natural personal who enters into an obligation through law on behalf of the company requires a
written agreement duly signed or orally. It should be accordingly to the company implied and
express authority.
A director should consider the company as a whole and must not ignore the interest of minority
shareholders and must not work in the interests of only one class of shareholders in the
company8anything related to the transaction should be subject to the team of the company
constitution. There should always be a vote on the matter regarding the deal to avoid reckless
trading9.
Conclusion:
Here Rebecca decision is equally important when the transaction thought the company is
involved. But if Simon honestly believes that he did it in good faith and the best interest10.
c.
Debra, Simon ex-wife was appointed as the company’s accountant. So being a company’s
accountant, it is evident that she knew about the specific transaction which had taken place11.
Law: Agency Act
Sec.18 (1)(c) of Companies Act a person such as director or employees or the agents of the firm
are not appointed and has no jurisdiction to practice continuing the business which is conveyed
by the company to practice.
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10
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Sec 18(2) the act of fraudulently or forges of a document that is noticeable having signature in
the interest of the company except for the person who is either dealing with the company or with
the property has entitlement or the interest and has the genuine knowledge about the frauds and
forgery.
Application:
According to the Agency and estoppels when a person is provided the authority to do anything
on behalf of the other party then that particular person is known as the agent. In this case, Simon
‘s company having no managing director and the company is of his and her cousin, since Simon
is the only person who is taking decision of the company.
Conclusion:
In case, if vendor overheard that Simon telling Debra about Rebecca unaware about the purchase
still the contract will be valid and enforceable if even one party has signed the agreement
becausea deal may form in a single party signaturein the document will be considered as a valid
document12.
Case
Collen V. Wright, 1857
In this case the implicit assurance of jurisdiction was produced. The common rule of agent is to
create anagreement in a proportion’s name which will be personally responsible for bargaining
only if he lacks in making a decision, then the proportion will not be responsible. Therefore, the
English law rejected this proportion. Later the agent is said to be responsible as the parties to the
principle of agreement on bases of the same term which is been used.
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