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TLAW202 Corporations Law Assignment
This case suggests an insight to the business expansion terms of a fisherman of New South Wales and its various aspects. As a scallop fisherman in the coastal water of Jervis Bay, New South Wales, Bob Beech is eligible to catch scallop maintaining the regulations under protective legislation. In order to maintain the balance in regeneration process, the Scallop Fishing and Marketing act has provided the fishermen with a quota system under which each fisherman is allowed to catch 50 tonnes of scallops each year. In addition to that, the Scallop Marketing Authority is bound to purchase only that amount of scallops from each fisherman as well. In order to prevent the fisherman surpass the law, Scallop Marketing Authority has also decided to look upon this fishing criteria as an offence and decided to fine $ 100,000 if any of the fishermen tend to break the rules. Under such a circumstance, Bob has found out that he possesses the capability of catching more than 50 tonnes of scallops every year which he cannot be able to do if he abides by the rules. As his earnest willingness of making more money through this fishing venture was growing, his daughter Alice suggested him that Bob can almost double his catch by incorporating a company.
In order to determine whether Alice’s suggestions were right or wrong, the prime advantages of incorporating a company to expand the business management should be discussed briefly. The advantages of incorporation are various that include growth of investment capital along with unlimited life cycle, share transferability and others. Firstly, the owners of the incorporated company will possess the advantage of bypassing legal obstacles and obligations. Secondly, it is easy for the owners of incorporated companies to transfer the ownership and securities to others to ensure the maximum life of the company. Incorporation helps the owners to cut down the tax rate they need to pay to the government (Incorporation. 2007)
Based on the advantages of incorporation, it can be said that Bob will have enough advantage of bypassing the legal criteria set by the Scallop Marketing Authority, as the quota related to the amount of scallop fishing is applicable to each fisherman. As he incorporates his company and include shareholders in the company, he will be able to hire the existing fishermen of Jervis Bay, New South Wales as the employees. In this way, he did not need to surpass the rules that are imposed to maintain the balance of scallop regeneration process. This process will automatically increase the number of scallop catch as Bob will not operate as a lone fisherman only, but he will be operating as a business entity.
Apart from harvesting scallops by hand, the Fisheries department of Australia also give permission to five miscellaneous divers to catch scallops going underwater. In order to expand the business Bob can hire one of those divers to work with him so that the count may increase. The export opportunities of scallops are very high, as scallops can be found in limited regions of South Australia. In this case, if Bob decides to export the scallops in the European Union as well in different parts of Australia, his initial investment will get doubled as an immediate effect. The incorporation process will not only increase Bob’s catch of scallop and the stock, but he will not have to be restricted within the barriers of selling the scallops to Scallop Marketing Authority only (Scallop commercial fishing. 2016).
In the light of the above discussion, it can be concluded that Alice’s conviction about his father’s fishing business and the opportunities was absolutely correct. However, Bob’s initiatives as a business entity should be much more responsible so that it cannot endanger the existence of the species. Other than this, Bob must make sure that he has enough money to set up the business initially and incorporate stakeholders those have knowledge regarding scallop fishing business. The incorporation of existing fishermen of Jervis Bay in Bob’s company is a must thing to do for surpassing the offence related charges that can come against him, causing him a massive fine. However, in order to double his catch, Bob needs to continue the process of catching the scallops too along with the other fishermen and try to start increasing his stock for future benefit.
This case of New Nirvana Ltd is one of a kind and showcases a powerful example that negligence can cause. The case suggests that the controllers of New Nirvana Ltd. are the members of a rock band names as N/N. The company’s rock concerts are set up and run by the subsidiary companies. One of those subsidiary companies is Nuclear Blast Sounds Pty Ltd. that is responsible for managing the sound of the concerts. The problem occurred when the negligence of Nuclear Blast Sounds Pty Ltd. has caused personal injuries to five audiences as they carelessly put the sound of a particular concert in Sydney too high. The audiences were diagnosed by permanent hearing loss. Nuclear Blast Sounds Pty Ltd has no insurance coverage for those who suffered by this accident. Moreover, they are not capable of paying the compensatory damages to the audience as well.
Before suggesting the five audiences whether they can claim damage from the parent company that is New Nirvana Ltd, it is essential to discuss the background of ‘negligence’ and its determining elements. According to McDonald (2005), negligence refers to a situation where the defendants have caused injuries to the plaintiffs by breaching their duty of care. The basic four determining factors of negligence are (a) did the defendant owe any duty of care to the plaintiff? (b) did the defendant breach the duty of care? (c) did the plaintiff suffer any injury? (e) was the injury caused by the breach in the duty of care? As per Muchlinski (2010), if the four questions are being answered and goes in favour of the plaintiff’s accusation, then the plaintiff need to prove the defendant’s liability in order to claim damages. In many cases, Australian court determines the negligence based on the seriousness of injury as well. Contributory negligence is also a factor that develops the court’s judgement (CORPORATIONS ACT 2001, 2016).
In this case, apparently, the sole responsibility of the damage of the audience will be incurred to the subsidiary company that is Nuclear Blast Sounds Pty Ltd. They have not only done a duty of care, but the company is incapable of paying the damages as well. The Australian Corporations Act 2001 outlined this area with clear indication of the responsibility for negligence damage. According to Tomasic Bottomley & McQueen (2002), if any subsidiary company fails to clear the damage or does not have any constructive insurance plan to safeguard the customers’ interest, the responsibility will be transferred to the parent company. Evidently, in this case, as Nuclear Blast Sounds Pty Ltd is incapable of paying damages for the personal injuries caused by their negligence, it is the liability of the parent company to take control of the matter. The audiences have suffered from severe injury and lost their hearing capabilities permanently, they have enough evidence to proceed with their claim for damages in accordance to negligence. As they are not getting a positive result by approaching Nuclear Blast Sounds Pty Ltd, they will possess the full right to file a lawsuit for damage claim against New Nirvana Ltd. However, if New Nirvana Ltd proves that they were innocent in this case and justified their position in front of the court, then the judgement can be amended as well.
The case refers to a significant part of Australian Corporations Law in accordance to the company constitution and agreement. Three partners Simon, Michael and Don run a project management company named Millennium Pty Ltd. together that deals with land purchases and sales. Don was appointed as the prime solicitor of the company who is responsible for supervising the solicitation section whenever any property dealing occurs. They have also decided that if any dispute or problem arises, they will try to solve that out by calling an arbitrator before approaching with the legal proceedings. Everything was going according to the resolution they made, until Simon and Michael meets with another solicitor who according to them was more efficient than Don. Without discussing with Don, they readily appoint him by replacing Don. As a result, the infuriated Don decides to take prompt legal action against them. The following discussion will focus on advising the company with their legal positions.
In accordance to the Australian Corporations Act 2001, the operational structure of the Millennium Pty Ltd. can be considered to be based on constitutional management. A specific registered company is guided by its own constitution that entitles the company with an individual entity and personality. Don, being the solicitor of the company possesses some special legal rights that can be seen as the advantages of his profession. Before going into that, it is important to understand whether Don was doing his duty efficiently or not. The solicitor of a small business must look after the legal needs of the business. A solicitor is incurred to provide assistance from structuring the entire business, preparing shareholders agreement, assisting with the employment law issues. In accordance to the case, it can be claimed that Don was performing his duty in a proper way. However, as the two other members of the company were not satisfied with Don’s proceedings they changed him without any legal procedures. According to rule 42.2 (6), if any company decides to change the solicitor or tend to do so, it must provide the existing or former solicitor with a notice regarding this issue, get it filed with court order and inform the other parties of the company. After the court approves it, the solicitor will act as a defendant, not the advocate when the hearing will start. In this case, as Michael and Simon have appointed a new solicitor by replacing Don, they must have issued this notice of change to Don as a prior duty. However, the case suggests no such measures taken by the party or the company that can make them face court’s disapproval. In such a circumstance, they can never discharge Don off his duty and for this reason, there is a bright chance of Don winning the case (PRACTICE DIRECTION 42 – CHANGE OF SOLICITOR - Civil Procedure Rules. 2016).
A focus should also be there on the agreement they made to go to any arbitrator if any dispute occurs. Other than being a solicitor, Don was also a partner in the company as the case suggests three of them set up the company. However, Don has breached the agreement condition or the rule of the constitution by proceeding with legal actions directly. The statutory contract among them was breached by Don. As Michael and Simon have not given him the notice of change, his role as a solicitor still binds him to the company. In that light, his decision for direct statutory action leaves the company with an advantage of filing a lawsuit against him regarding the breach in agreement under Corporations Act 2001. The company’s legal position seem to be positive on that note, while on the other hand, they may not stand a chance against Don, provided he becomes able to submit enough evidence to the court regarding his unfair dismissal from the company. Moreover, Don can claim to be in a strong legal position compared to the company in accordance to Fair Work Act 2009. According to Tomasic Bottomley & McQueen (2002), the act suggests unfair dismissal can refer to a dismissal that is unreasonable. Under such a circumstance, the company may retrieve its chance of winning by submitting reasonable evidence of Don’s poor efficiency as a solicitor that affected their business and hindered their growth. As a whole, in the light of Millennium Pty Ltd’s position, it can be said that the company has 50% chance of winning the case through legal procedures. However, if they manage to make Don understand to go for the arbitrator, they may survive and resolute the problem.
CORPORATIONS ACT 2001. (2016). Austlii.edu.au. Retrieved 29 September 2016, from http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/
Incorporation. (2007). Investopedia. Retrieved 1 October 2016, from http://www.investopedia.com/terms/i/incorporate.asp
McDonald, B. (2005). Legislative intervention in the law of negligence: the common law, statutory interpretation and tort reform in Australia. Sydney L. Rev., 27, 4
Muchlinski, P. (2010). Limited liability and multinational enterprises: a case for reform?. Cambridge Journal of Economics, beq023.
PRACTICE DIRECTION 42 – CHANGE OF SOLICITOR - Civil Procedure Rules. (2016). Justice.gov.uk. Retrieved 28 September 2016, from https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part42/pd_part42
Scallop commercial fishing. (2016). Fish.wa.gov.au. Retrieved 1 October 2016, from http://www.fish.wa.gov.au/Species/Scallop/Pages/Scallop-Commercial-Fishing.aspx
Tomasic, R., Bottomley, S., & McQueen, R. (2002). Corporations law in Australia. Federation Press.