2: Lecture Partnership - Smith v Anderson: Carry on A trust was created for investment purposes to purchase shares and debentures

in a number of companies. The trust contains more than 20 people, including Smith, as an investor. Smith applied to wind up the trust due to the thought that it was not a trust, but an illegal partnership which exceeded the max. number of 20 people. Court: not a partnership as there were no intention to repeat the venture, and thus no carry on element. - Checker Taxicab Co Ltd v Stone: not in common. A driver hired a taxi car from the owner of a garage, who incurred all the expenses in running the car, and pay a % of earnings as rental fee to the owner. The court held that they were no partnership formed due to no mutual rights and obligations btw the owner and the driver, there were distinct and separate businesses. - Re Megavand: Labels arent important!! Lender is a partner due to the sharing of Profit and LOSSESS, examine partnership books, receive quarterly statement, loan is not repayable until partnership dissolved. - AM Marketing Pty Ltd v Howard Media Pty Ltd: mere sharing profit not partnership D agreed with P to share 50% of its profits as pays to marketing consultant fees, had a joint account which P had control; later P sued D for overdue invoice. D held they were in partnership, thus no debt owing. Court: no partnership due to failure to satisfy acting in common test: D was the only signatory to the joint account Only D has control and access to internet banking Thus no mutuality Also, D+P prepared separate invoices and no partnership tax returns re lodged. Significance: mere sharing profit not partnership; share of losses stronger partnership - Duke Group Ltd v Pilmer: People do sth tgt to get profit does not mean they are in partnership. - Miah v Khan: actual vs contemplative partnerships The partnership fell apart b4 the business is actually open to trade; court held partnership exists, there is a business that has been carried on in common with a view of profit, and they incurred expenses and acquired assets. Significance: a business can be carried on b4 it opens for trade - Goudberg v Herniman Associates: NOT carried on! Contemplated partners. Goudberg and Williams were acting in common and with a view of profit by taking research and investigation on their business plan; however, the business had never been carried on. i.e. no further actions were taken by the parties. The Herniman Associates failed to sue Goudberg for unpaid architectural service fees, which Williams was the contractor, as G is not a partner of W. - Llyod v Grace, Smith & Co: Jointly + several liability for torts s10 An innocent partner faces potential unlimited personal liability for tor even if the partner is not the party to blame - Mann v Hulme: misapplication of money/property s11 - Lynch v Stiff: liability by holding out/estoppels s14 - Chan v Zacharia: Fiduciary Relationship They were partners in medical practice. After dissolution of the partnership, but b4 the wound up of partnership affairs, Chan sought to renew the lease on the premise with his own name, and exclude Z from practicing there. Court: Chan breached fiduciary duty by failing to act in perfect fairness and good faith of the other partner, thus liable for that private profit. - Mercentile Credit Co Ltd v Garrod: Agency relationship within the scope of business A+B: partners in a garage business. A sold a car which belongs to B to C, binds B as the act is within the scope of the business, and that A has apparent authority to transact. Goldberg v Jenkins: in a usual way Partner borrowed at over 60% above normal interest rate thus other partners not bound since it is unusual! - United dominions Corporation Ltd v Brian Pty Ltd: JV partnership Significance: defines the difference btw JV and Partnership; one sharing output; one shares profits 3 parties involved in the JV, which is found to be a partnership.UNC took all the profits since the other party of the JV did not pay the debt owed to UDC; Brian did not know about this contract, and sued for his portion of profits. Court held that there was a partnership (sharing of profits, not products), and that fiduciary relationship existed between the parties. Brian was entitled to his portion of profits. -

Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Ltd: JV Significance: Labels arent important labeled as JV; but Court held its a partnership as it fulfills partnerships test. Lecture 3: Association - Bradley Egg Farm Ltd v Clifford: committees liable in damages for breach of contract Bradley Egg Farm Ltd had its poultry tested by an employee of an unincorporated association, which tests whether the birds are infected by any diseases. The birds either died or be killed by the employee negligently. Bradley Egg Farm Ltd sued the committee members for breach of contract and succeeds. Smith v Yamold: committees liable under tort Smith was injured when the grandstand collapsed, who then sued Yamold, the committee of the unincorporated association which organized the race, for tort and breach of contract. Court held that Yamold was liable as occupiers of the premises under tort, and other committees are not. Lecture 5: Corporate Constitution - Hickmans case: btw the co and each member The Cos constitution stated that any disputes arose from members and the Co should be resolved by arbitration before going to court. Hickman went to the court before taking any arbitration, and the court held that the cos constitution was enforceable by the co to its members, and that Mr. H should complete the arbitration before legal proceedings. - Forbes v NSW Trotting Club: statutory contract not binding on outsiders of the Co - Gambotto v WCP Ltd: altering constitution Mr. G was a minority S/H of WCP, which altered the constitution to buy up Mr. Gs shares. The court held that the alteration was invalid as it was not for a proper purpose. It would be in proper purpose if the expropriation would save the Co from significant detriment/harm, e.g. keeping the S/Hs ownership would result in the loss of the Co. - Freeman and Lockyer v Buckhurst Park Properties: Apparent Authority A director has contracted with Freeman (architecture services) on behalf of the Co, Buckhurst, which the defaulted payment of servicing fees to Freeman. Buckhurst has no managing director. Freeman sued the director and Buckhurst for payments, the other directors held that the co is not liable since they did not authorized the director to enter into such contract. The court held that the director was held out by other actual directors which induced a third party to enter into a contract, which binds the Co due to APPARENT Authority. Significance: Co is binding on contracts formed by an agent who has no actual authority if the followings are fulfilled: holding out by some 1 who has actual authority on which an outsider has relied on. - Northside case: no authority to bind the Co, IMR failed due to Put on inquiry exception. The director obtained a mortgage from the bank by putting the Cos major asset as security. The common seal was signed by the director, and his son, who is acting as the Cos secretary, but who is not appointed, and that other directors were unaware. When the director defaults the repayment of the debt, the court found that Northside was not bound by the loan contract, and that the common seal was invalid. The bank did not satisfied the use of IMR, where it should have been suspicious that a passive co like Northside may not have financing needs; and also the mortgage was without any commercial advantages to Northside. The bank should have put on inquiry, which it did not, thus IMR failed and Northside was not bound. - H L Bolton co ltd v T J Graham & Sons: The state of mind of these managers is the state of mind of the Co. e.g. where law requires a guilty mind as a condition of criminal offence, the guilty mind of the directors/ mangers will render the Co itself guilty. - Lennards Carrying Co Ltd case: The state of mind of mgmt = state of mind of the co. - Tescos case: ordinary employees arent the directing mind and will of the Co. Tesco advertised discount, but products sold at full price; Tesco held that was the shop assistants who put the wrong prices, who cannot represent the mind of the Co, accepted by court. - ABC case: statutes can make Co liable for the actions of their employees even if the latter are not the directing mind and will of the Co. Since the offence was

breached by junior employees, the court examined the terms of the offence and the reason for the policy act, found that a child care centre can only protect the children from hazards and supervise them through their employees. Thus, the employees failure to take care of the child breaches that Children Services Act, and thus the Co. A Co can observe the standard of child care only through human agents ABC liable. Lecture 6: Promoters - Tracy v Mandalay Pty Ltd: Passive Promoters It is not only the persons who take an active part in the formation of the co are promoters, persons who leave it to others to get up the co and that they will also profit from the operation may become promoters. The S/H of RSC took no active part in the project, but stood to profit, are held by court as promoters - Erlanger v New Sombrero Phosphate Co: need full disclosure and genuine consent to authorize conflicts of interest. Erlanger, the promoter of the Co sold an island to the Co at a profit. The BOD accepted the offer without enquiry into facts/figures. New BOD sued to revoer the purchase price and rescind the contract successful as Erlanger did not disclose the conflict of interests. - Gluckstein v Barnes: insufficient disclosure and lack of independent directors Gluckstein and 3 other directors bought a property at a profit which was partly disclosed. The promoters breached the F. Duties and were liable to account to the Co for their secret profit. - Twycross v Grant: Active promoters - ASIC v Maxwell: not sophisticated investor The accountant did not investigate whether the investors are sophisticated, i.e. who had previous experience sufficient to allow them to assess the merits of the offer and risks involved. Thus, the s708 sophisticated investor exemption was unsatisfied. And the accountants conduct contravened the misleading and deceptive conduct provisions, and was granted an injunction under s1324, permanently restrained from publishing statements referring to offers of securities. - NRMA case: misleading and deceptive prospectus The court held that the prospectus issued by NRMA failed to make full and fair disclosure of all material facts that would enable members to make informed decisions. It had also failed to state the main disadvantages of the propose restructure of the Co and that the free shares offering were in fact an exchange from members current membership rights. - Concept Sports case: misleading and deceptive prospectus s728 CAM Ltd purchased shares in Concept Sports through a prospectus with forecasted large profits. Within 2 months, the share price dropped by 70% and the Co revised the forecast to record a large loss. CAM sold the shares and sued under 729. Original case: failed as rescission was not possible due to sale of shares Appeal: succeeded Significance: i. Confirmed plain words of CA dealing with remedies for defective prospectus; ii. Removed uncertainty obstacles in the original case; iii. Strengthen the rights of S/H who purchased via a defective prospectus; Lecture 7: share capital, meetings and transactions - Brisconnection: calls made by directors are enforceable during the life of the Co Due to GFC, the price of stocks dropped to $0.001, which attracted many retail investors to purchase up to thousands of units. However, these retail investors did not know that there were 2 further installments to be made for $2 per share. As a result, these unsophisticated retail investors had actually bought into a debt of several hundred thousand dollars, and faced bankruptcy if they could not make the call. These made the joint underwriter, Macquarie bank to offer to purchase units from retail investors who hold less than 50,000 units. Significance: ASX introduced new rule that brokers have to obtain an agreement from investors prior to any purchases of partly paid securities, that they had read and understood the terms and legal obligations in purchasing the securities. - Re Wragg Ltd: Court would not get involved to determine the value of non-cash consideration share transactions, unless there is fraud involved.