University Case Study: Commercial and Transport Law Assignment 3

This assignment is a detailed case study analysis focusing on two distinct scenarios within commercial law. The first case examines the application of vicarious liability and the doctrine of indoor management in a food restaurant company. The analysis explores the responsibilities of the company when an employee makes an unauthorized purchase from a supplier. The second case study delves into the duties of a director under the Corporations Act 2001, specifically addressing the consequences of a director's actions after resignation, including potential breaches of fiduciary duties. The analysis covers the implications of poaching employees and establishing a competing business. The assignment applies relevant legal principles and statutory provisions to determine the liabilities of the parties involved, providing a comprehensive understanding of commercial law concepts.

Running Head: CASE STUDY
CASE STUDY
Name of the Student
Name of the University
Author’s Note

1CASE STUDY
Table of Contents
ASSIGNMENT 3:...........................................................................................................................2
Facts:................................................................................................................................................2
Issue:................................................................................................................................................2
Rules:...............................................................................................................................................2
Application:.....................................................................................................................................4
Conclusion.......................................................................................................................................5
Facts:................................................................................................................................................5
Issue:................................................................................................................................................5
Rule:.................................................................................................................................................6
Application:.....................................................................................................................................8
Conclusion:......................................................................................................................................8
REFERENCE:.................................................................................................................................9

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ASSIGNMENT 3:
Facts:
Micky & Minne Co is a food restaurant company. Matthias is the Director Purchasing
and the Store General Manager. Jason is an employee of the company whose main duty is to
work in the front counter but he helps in the kitchen from time to time. Benning is the supplier of
RSPCA fresh chicken to them. On a busy day, when Matthias was not present, Jason made a deal
with Benning for the supply of 30kgs of non-RSPCA approved chicken. Jason did not pay for the
chicken. ]Micky blamed Benning for not knowing that Jason is not responsible to make deals for
chicken. Hence, the claim.
Issue:
The issue in the case is whether Micky and Minnie should be liable to Benning for the
non-payment of consideration amount to the supply of 30kgs of fresh chicken meats.
Rules:
Doctrine of Indoor management: it is an exception to the doctrine of constructive notice
stating that every person dealing with the company should have the knowledge of the company’s
affairs of the internal matters with respect to the Articles and Memorandum of the company.
However, the doctrine of indoor management protects the third parties or the outsiders who may
have dealt with the company without the knowledge of the internal irregularity of the company
(British Bank vs. Turquand [1856] 6 E&B 327). Section 129(4) of the Corporation Act 2001

3CASE STUDY
states that the person who has been dealing with the company may assume that the duties
performed in due course of dealing is by the agent or the employee of the company. Further
Section 129 (3) of the Act states that the person who has been dealing with the company may
assume that the agent or the employee who has been dealing with such person has been duly
However appointed by the company and has the power and authority to exercise the rights and
duties which are supposed to be exercised by the officer of such designation in the company.
However, as per section 164 (4) of the Corporations Act 2001 it has been state that if the
person has the actual knowledge of the irregularity then he or she shall not be protected by the
law (Howard vs. Patent Ivory Manufacturing co [1888] 38 Ch D 156).
Vicarious Liability: it is a secondary and a strict liability where the employer is held
responsible for the wrongs committed by the subordinates (qui facit per alium facit per se). In
other words, the employers are held liable for the wrongs committed by the subordinates or the
employees or servants of the company which has resulted in damage or harm to the plaintiff.
However, the determining factor in the establishment of the vicarious liability is that whether the
servant was in the due course of employment with the employer or not (Hollis vs. Vabu [2001]
207 CLR 21). The course of employment can be determined by the authorization or connection
with the authorization of the power which can be considered as a mode of performing the
obligation. The knowledge of the act to employer is not considered (Meridian global Funds
Management Asia Limited vs. securities Commission [1955] 2 AC 500). In Prince Alfred
College Incorporated vs. ADC [2016] HCA 37 it has been held by the court that vicarious
liability can also attract criminal provisions for the damages incurred to the plaintiff due to the
negligence of the servant or the employee of the employer.

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Civil Liability Act 2002, section 49 (B) states the vicarious liability where the employee
shall not be liable for the wrongs committed by him during the course of employment. Rather,
the burden of liability shall shift to the employer in such instances.
Following are the tests for the establishment of the employee and employer relationship:
 The organization test where it is established whether the person was hired by the
employer for a particular set of duties against the consideration as laid down in his or her
employment contract.
 The control test when the employer retains the authority to control what the person
works and also the way the person works.
 The integration test where the duty performed by the person is the integral form of his
employment and not an accessory to his contractual services.
 The multiple test which amalgamates the organization test and the control test.
Application:
In the given scenario, Micky and Minnie Co is a company established under the
Corporation Act 2001. The Director of Purchase was appointed and it was his responsibility to
look after the sales and purchases of the company. Applying the doctrine of indoor management,
Benning shall be protected from the internal irregularity of the company with respect to the right
to purchase and sale on behalf of the company and hence, Micky & Minnie Co shall be liable for
the payment of 30kgs chicken being supplied by Benning upon Jason’s orders.
In the given scenario, applying the doctrine of vicarious liability and section 49 (B) of the
Civil Liability Act 2002 (Tas), it can be stated that the relationship of Jason with the company

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was that of the employee and the employer and Jason had made the order during the course of his
employment in the restaurant. Hence, the company shall be liable for the payment of the 30kgs
of chicken being ordered by him irrespective of the fact whether the Directors had knowledge
about the same or not.
Conclusion:
It can be concluded that Micky and Minnie should be liable to Benning for the non-
payment of consideration amount to the supply of 30kgs of fresh chicken meats.
Facts:
Micky & Minne Co is a food restaurant company. Matthias is the Director Purchasing
and the Store General Manager. Benning is the supplier of RSPCA fresh chicken to them. On a
busy day, when Matthias was not present, Jason made a deal with Benning for the supply of
30kgs of non-RSPCA approved chicken. Jason did not pay for the chicken. ]Micky blamed
Benning for not knowing that Jason is not responsible to make deals for chicken. After the loss
incurred to Mickey, Matthias was blamed for the negligence caused by Jason for failure to
control the actions of Jason and decided to impose a penalty on Matthias as salary deduction.
This infuriated Matthias and he convinced Jason and other 11 employees to resign from the
company. Further, he opened a competing store opposite to Micky & Minnie. Hence, the claim.
Issue:
The issue in the case is whether Micky and Minnie can sue Matthias for causing loss of
11 staff.

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Rule:
Sections 180-183 of the Corporation Act 2001 lays down the duties of a director in
company to act in the best interest of the company without conflicting personal interests with
that of the company. These duties include the fiduciary duties as well as the general duties
towards the company. Section 180 lays down that it is the duty of the director to act with care,
skill and due diligence towards the matters of the company to avoid mistakes and negligence.
Section 181 lays down the general duties of the director which binds them to act in good faith of
the company (ASIC vs, Cassimatis (No 8)[2016] FCA 1023 ). Good faith includes the duty to
be loyal and act in complete loyalty to the company. Section 182 means not to misuse the
position of the directorship of the company for the achievement of personal gains over that of the
company. Section 183 of the company lays down that it is the duty of director to not misuse the
information of the company for personal gains.
However, the resignation of the director may lead to certain vulnerabilities. The resignation
of the director itself does not create any vulnerability but it is the consequent breach of conduct
with may lead to vulnerability arising out of the resignation of the Director from a company.
Such reasons may include:
 The director resigns to pursue the personal benefit which the company was aiming for.
 The director resigns to acquire the opportunity of the company in personal capacity.
 The designation of the person as the director to such company has led him to the
opportunity that he acquired post resignation.
However, setting up a competing business post resignation does not imply the breach of conduct
but the use of information or the way of establishment or using the former company’s

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information to acquire business or investors is what leads to the breach of conduct or the breach
of fiduciary duties of the person as a former director to the company. In Advanced Fuels
Technology Pty Ltd vs. Blythe and Others [2018] VSC 286, it has been held by the court that
the director’s fiduciary duties has been recognized by the common law, equity and even the
statutes which does not end with the termination of the director. In other words, the person who
was the former director to the company shall be held liable only if he misused the company’s
information to personally acquire the opportunities that the company was aiming for and the
person had the knowledge of such opportunity during his course of employment. The fiduciary
duties of a director to always act in good faith and loyalty towards the company does not
extinguish after the termination of such director (Sharp and others vs. Blank and others [2015]
EWHC 3220). In fact, the fiduciary duties continue to enlighten the director of the separation of
opportunities available to him due to the knowledge about the company’s information owing to
his position as the director to such company. Approaching the employees of former company for
job requirements is not the breach of duty in itself unless the conduct proves to influence the
employees on other grounds by using the information of the company or his position as a former
director to the company to duress or influence the employees to leave the company (Heath and
Sanders 2016). Section 1.5.5 of the Corporation Act 2001 state that the duty of the director
towards the company continues even after the deregistration of the company from the Registrar.
Further section 260E of the Act explicitly states that the duties of a director continues to exist
even after the transaction is unauthorized by a provision of the Act approved by the resolution of
members under a provision of this Act. This means that the director can only be removed by
passing a resolution in a meeting under the provision of this Act. Any such transaction does not
limit the director from exercising his or her fiduciary duties towards the company.

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Application:
In the given scenario, Matthias is the Director of Purchasing of the Micky & Minnie Co.
He owed the duty of care and loyalty towards the company. He also owed the duty to act in good
faith towards the company as enshrined in Sections 180-183 of the Companies Act 2001. After
he resigned, he still owed the fiduciary duties towards the company. However, the losing of staff
in itself does not establish that Matthias is hiring them for his personal opportunity. However,
poaching them to leave the company and join the company of the resigned director by misusing
the information of the company or influencing the position of a former director to the company
shall lead to the breach of fiduciary duty. However, in given scenario, the facts does say the
Matthias was angry and he influenced the people along with Jason to leave the company but such
influence was made before his resignation. After the resignation, Matthias did not engage in any
poaching activities towards the company and hence, Matthias cannot be held liable for the
resignation of staff from the company.
Conclusion:
It can be concluded that whether Micky and Minnie cannot sue Matthias for causing loss
of 11 staff.

9CASE STUDY
REFERENCE:
Heath, C., & Sanders, A. K. (Eds.). (2016). Employees, Trade Secrets and Restrictive Covenants.
Kluwer Law International BV.
British Bank vs. Turquand [1856] 6 E&B 327
Howard vs. Patent Ivory Manufacturing co [1888] 38 Ch D 156
Hollis vs. Vabu [2001] 207 CLR 21
Prince Alfred College Incorporated vs. ADC [2016] HCA 37
Meridian global Funds Management Asia Limited vs. securities Commission [1955] 2 AC 500
ASIC vs, Cassimatis (No 8)[2016] FCA 1023
Advanced Fuels Technology Pty Ltd vs. Blythe and Others [2018] VSC 286
Sharp and others vs. Blank and others [2015] EWHC 3220