3.

Exercise due care, skill and diligence (Keppell; Dargusch; Motor Investments; Havas);
AGENCY 4. Act in person/duty not to delegate (John McCann)
STEP 1: Define Agency 5. Act in Prs interest; no conflict of duty (Hewson; Walden Properties; Lintrose)
Fiduciary relationship (not a law) between Principal and Agent that binds the actions of the Agent 6. Maintain confidentiality
and liability upon the Principal. Agent can contract on behalf of Principal. This authority is 7. Keep separate and proper accounts
provided by the Principal to the Agent to act on behalf of the Principals interests only. This 8. Not make a secret profit
circumvents Doctrine of Privity.
DOCTRINE OF UNDISCLOSED PRINCIPLES (UDP)
9. Not receive secret commissions - Bribing, insider trading; anything that breaches fiduciary When Agent has K with Third Party - Doctrine allows Principle to sue or be
STEP 2: Determine who the Pr and the Agent is (could be multiple Agents or Prs in relationship. sued by 3rd PARTY (Privity)
question)
RIGHTS OF AGENTS -- (AGAINST PRINCIPAL) 7 limitations (requirements) for Doctrine of UDP:
1. To receive payment (Moneywood) 1. A must be acting within authority..
CATEGORIES & CLASSES OF AGENTS 2. Contingent upon 1-9 Agents duties. 2. Must be evidenced to show who Principle is (If A enters into K in As own
STEP 3: Identify which of the 3 Categories of Agent 3. To indemnity and reimbursement. name, evidence (written) may be admissible to show real Principle so real
a. General agent Limited to trade, power under special PoA (Power of Attorney) a. Indemnity: Pr will bear the burden of any burden imposed against the A by TP (i.e. Principle can sue or be sued (Humble v Hunter) Principle couldnt sue TP
b. Special agent Hired for specific purpose, authority limited to ambit of what has been action, etc) b/c evidence was inadmissible=no doctrine. Parol evidence rule-oral cant
specified i.e. real estate b. Reimbursement: any reasonable expenses during agency; usually specific in vary written K.
c. Universal agent Unlimited power. Can do any actions specified/authorised by Pr. agency agreement. (i.e. registration, travel) 3. K does not exclude possibility of undisclosed Principle - K must not deal
4. Of lien -allows A to retain interest in goods until any payment owed to A by Pr is cleared of with As personal capacity (Said v Butt) - A bought ticket in Agents own
Common Agency relationships stoppage in transit until any payment owed to A is paid by Pr (i.e. trade/movement of goods). name for Principle, TP did not let Principle enter theatre b/c Principle
Partnership - Partners are both principals and agents (each partner is agent of the other). banned. Principles actions against TP failed.
Company Directors - By being appointed or being held out (as a director or officers) . ANZ Bank v Ateliers de Constructions Electriques : Implied actual authority (to create business efficacy) and express actual 4. Defences available for TP If sued, TP can use defences Und. Pr that could
Agents of the company (the only way a company can act) (As well as agents of each other). (through original agreement). TPs cheques were paid to A, which banked the cheques in their account since Pr did not have an be used on Agent.
Employer-Employee - Not an automatic agency (Depends on circumstances). Australian account. A did not given Pr all of the money, and Pr went bankrupt. Pr sued the bank, claiming that A did not have
authority to bank cheques in As account. Held: Because Pr had no Australian account, A had implied actual authority (to give 5. 3RD PARTY must act within reasonable time (can only sue A or Principle-
Independent Contractor - Not always Agent. Usually has own materials and work. business efficacy to the operation) to endorse the cheques into their account on Prs behalf. Pr was unable to recover from the Cant change, mind to sue Principle after existence known unless- As
NOT Agents dont mistake these for Agents distinguish bank, and could not claim that A had no authority. judgment set aside)
Bolton Partners v Lambert: Retrospective ratification by Pr. Prs ratification = acceptance. A did not have authority, but
X Bailee/Bailor. accepted offer anyways. TP revoked offer. Pr ratified As acceptance of the offer, and was granted specific performance and TP was 6. If undisclosed Principle intervenes and sues TP, Ag cannot pursue remedy.
X Company directors and other company personnel. unable to cancel. One cause of action only (unjust enrichment)
X Employer/employee (where no authority is given to act). Great Northern Railway v Swafifeld: Agent of necessity. S (Pr, D) sent a horse by rail, but there was no one to meet it when it
arrived. P would have been in breach of duty as carrier if horse was not taken care of. P was able to claim stable charges back. 7. A must have contracted as an A or A is personally liable (A not liable if
X Franchisor/franchisee.
Freeman & Lockyer v Buckhurst : Company bound by agent. K and H formed a company and were each directors. K was never identity (name) of Principal not known, but existence of Principle is known)
X Independent contractor - Independent Contractors Act 2006. formally appointed, but acted as managing director (A), with the companys knowledge. K (A) contracted TP to do some work for
X Mortgage broker/originator act on behalf of individual and the originator. the company. Held: K had no authority to employ TP, but did have apparent authority as managing director. The company was
bound and estopped from denying Ks agency. Humble v Hunter: A (the son) signed a K to hire a ship as the owner (the Pr). The undisclosed Pr (his mother/real
X Partners. Crabtree-Vickers v Australian Direct Mail : No actual authority to hold out a person as having authority Failed Freeman & owner of ship) could not sue the hirer (TP) on the A/TP K. Parol evidence was not admissible to show that A had signed on
X Selling agent Real estate agent. Lockyer test.. Family company had a board of 4 directors. Peter, who had been a director in the past did not have an official title, behalf of the undisclosed Pr.
but work for the company. Peter attempted to accept a K for the company by signing per one of the directors. Held: Only t Said v Butt: Undisclosed Pr. The unwelcome theatre critic. The managing director (TP) of the theatre had banned Mr Said
management team, or the full board had actual authority to enter into the K; Peter had no actual or apparent authority to K. The (Pr), the critic, from the theatre. Pr asked a friend (A) to buy a ticket for Pr in As name. Pr was refused admission and Pr
director signed per for did have apparent authority, but could not hold Peter out as having apparent authority. Therefore no K. sued the TP for not letting him enter. Action by Pr against TP failed. The identity of Pr was not important and the objection
CREATING AUTHORITY (CHARACTERISTICS) Panorama Developments v Fidelis Furnishing: Apparent authority of company secretary. A was company secretary. A to Pr was personal. As Prs identity had not been disclosed, there was no K, and the doctrine of the undisclosed principle
booked cars from TP without Pr knowing, and said they were for company use. Held: Pr liable to TP for As actions since A had did not let undisclosed Pr (critic) sue TP (manager).Pr ratified As acceptance of the offer, and was granted specific
STEP 4: Discuss how the Agency was created apparent authority of Pr as a company secretary (entitled to sign Ks in relation to admin matters, etc). performance and TP was unable to cancel.
a. Expressly : Written/ oral/ by deed; First Energy v Hungarian International Bank: Apparent authority of unauthorized agent. A was a senior manager of the Pr
b. Implied : through conduct/ past course of dealings; bank, who negotiated bank credit to finance customer, TP. When head office management of Pr decided not to go ahead with
financing, TP sued Pr. As letter to TP was an offer of finance from Pr, which TP had accepted. Held: A did not have apparent
authority to approve finance, but did have apparent authority to communicate decisions and sign letters on behalf of Pr. Pr was
TORT LIABILITY
c. Operation of law: committed to the K because of As position with the bank. How to Mitigate Principals Tort Liability from Agent
i. Cohabitation (married/ common law) Pacific Carriers v BNP Paribas: Arming the agent with authority. A, a Department Manager at a bank, had an offical stamp 1. Issue Disclaimer/ waiver of Liability Tell TP the As status/scope and not
from the bank, giving the impression that A had greater authority than in reality. Held: When A (acting honestly) exceeded her
ii. Ratification can be ratified after the unauthorized act by Principal. (Bolton) authority and stamped a K, Pr was liable to TP on the K made by A.
to exceed it.
iii. `Necessity ( Great Northern Railway v Swaffield) Heperi Pty Ltd v Morgan Brooks Pty Ltd: PR responsible for Agent for fraud. Pr, a mortgage lender appointed A as its Coffs 2. Ensure that the scope of authority Is expressed and specific (limited
a. Cannot contact Pr for further instructions Harbour Agent. TP invested $4M with A, who fraudulently misapplied TPs money. Only a small amount was recovered. TP would scope of authority)
be able to recover the rest from Pr if A were an agent, and if A was acting within their authority. Held: (1) A did not have actual
b. Genuinely forced to take action in the circumstances - that benefits Pr. authority to advise on or make investments. (2) A did have apparent authority to make these investments since A used Prs
General scope = too open.
c. Acting in Good faith for Pr, and others. stationary and was allowed to represent himself as manager. There was no disclaimer by Pr that A was acting independently. Pr Limited scope - Tell the A what actions you can perform on behalf of me the
was held liable for expectation damages. Principle. Anything beyond they will be personally liable.
** Agency is created when these 3 above occur ** Keppel v Wheeler: Care, skill and diligence expected of an agent. Pr appointed A (real estate agent) to sell a property for
$6,500 and accepted an offer for $6,150. Before settlement, a second offer of $6,750 was made. A contacted first offeror and
STEP 5: Discuss the TYPE of AUTHORITY suggested he sell to second for a profit. Pr was awarded of the difference between the two prices. TERMINATION OF AGENCY
1. Actual express or by action (ANZ Bank v Ateliers); Actions of Parties:
2. Implied through conduct of Pr or the Agent. (ANZ Bank v Ateliers). 1. Mutual agreement (Principle must notify TPs b/c As can still have
LIABILITIES TO THIRD PARTIES -- (THE OTHER GUY) apparent authority)
3. Apparent(Ostensible) through representations (statements) or conduct (actions) General rule: An Agent cannot sue or be sued on a K between the Pr and a TP where: 2. Revoke As authority (A can sue for wrongful dismissal or loss of expected
(Freeman & Lockyer) (also:Panorama; First Energy; Pacific Carriers; Heperi) 1.The Agent discloses the agency relationship and names the Pr (unnamed Pr) commission).
Test #1 For Apparent authority established from (Freeman & Lockyer) 1.The Agent discloses the agency relationship but doesnt name the Pr (named Pr) 3. Agent withdraws
a. Must be holding out (representations made) to TP. (Crabtree v Vickers - no 4. Dismissal for breach (i.e. secret commission)
LIABLE: If Agent in contracting to sell property/goods that belong to Pr A is liable (because A is a 5. Completion of purpose
apparent or actual authority to sign K as a Director)
contracting party) 6. Time limit - (expiry or natural completion of Agency agreed upon or no
b. Person must have actual authority. If A is selling on account of principal = A is not liable more matters)
c. Third party relied on this holding out by person. NOT LIABLE: By Law
Test #2 Person MUST have ACTUAL authority to hold-out as a person with If A signs for X Corp = A is not liable to TP 1. Death of A or Principle (cannot be ratified by estate, but anything A does
authority in good faith before death of Principle known not personally liable )
( Crabtree v Vickers) If A signs with agent after the signature = A is not liable to TP 2. Bankruptcy (if A or Principle go bankruptcy)
3. Illegality
If K states, agent for principal = A is not liable to TP (declares agency relationship) 4. Frustration of K
DUTIES & RIGHTS (OF AGENT) **By-passes the doctrine of privity 5. Dissolution of Company.
DUTIES OF AGENT
1. Follow Prs instructions.
2. Act in person (no delegation to others).
PARTNERSHIP
All sections are from the Partnership Act (1891) Qld.(PA)
 PA s6(1) sets out other negatively framed rules to which regard shall be had
STEP 1: Start with general COMMON LAW definition (Partnership) 1. Common ownership of property, tenancy
Partnership is the relation, which subsists between persons carrying on 2. Sharing of gross returns
business in common with a view to profit. (S5(1) PA). 3. Sharing of profits (prima facie evidence of partnership)
SAY: Partnerships in Qld are governed by the Partnership Act in which rules *** If satisfied then a prima facie partnership exists IT IS NOT A
of equity and the common law continue in force so far as they are REQUIREMENT the more elements, the stronger the case for Partnership.
inconsistent with express provisions of the act (s121 PA); The courts look not only at what the parties must be taken to have intended
Partners are also agents for each other and agents for the partnership rules but at their conduct towards each other while carrying on the business
of agency apply
Partnership begins when they make their first move towards being a Case Examples of Partnership:
partnership not when they begin trading.in furtherance of the business. Khan v Miah: (1) Joint account (2) 5 worked together, but had separate duties (3)
broke apart
STEP 2: Identify Partners and the Cause of Action Not Partnership:
Who are the members in the Partnership? Keith Spicer: bought supplies but only prep (2) intended to later incorporate no
a. Max number is 20 Partners (s115(b) Corps Act); unless special type of further steps.
Kang-Kem: (1) joint bank account (2) operational manager (3) staff and finances (4)
partnership
obligations were separate and severable = no partnership because no
mutuality of rights
Cox v Coulston: (1) one got the theatre other got singer = JV
RESTRICTIONS UPON PARTNERSHIPS
1. Generally Max number of partners is 20. (S115 Corps Act)
DEFINITION OF PARTNERSHIP 2. Unless special category covered by Corporations regulations Pt 2A.1.01
3. If more under Corps Act, then you must incorporate.
STEP 2: DEFINE the STATUTORY DEFINITION (PA) 4. Partners can be multinational.
s5(1) Definition A relationship between persons carrying on a business with
a view of profit, in a common goal.
Limb 2 -- Ostensible Authority
Even though partner acted without authorization firm is still bound where:
(a) acted within ordinary scope of the business (objective and subjective
test)
(b) transaction carried out in usual way
(c) third party reasonably believed partner to be a partner
STEP 3: Partners in Firm are bound EXCEPT:
s10 - Partner using Credit of Firm for Private Purposes (Panorama)
(1) Other than an ILP, for purposes not connected with the firms ordinary
course of business; the firm is not bound unless the partner is specially
authorised by other partners.
s11 - Effect of Notice that Firm Will not be Bound by Acts of Partner
(1) If TP has knowledge there are internal rules re credit, no act done in
contravention of the agreement is binding on the firm.
s9 - Partners are bound by acts on behalf of the firm UNLESS:
It is for their own benefit and not on behalf of the firm
Chan v Zacharia two important issues arising from this case Authority for fiduciary obligations between partners vary
in agreement by full disclosure had D expressed he was intending to take over the lease he would have had Ps implied
consent or knowledge .May disclose Partnership opportunities to P while pship was ongoing it is ok for P to have held
the lease if he first obtained Ds consent under fiduciary relationship.
LIABILITY TO OUTSIDERS
Liability of Partners in contract law

s 6(2): Carrying on a business any trade or commerce (Smith v Anderson)

s 27 : View of profit the parties intend to profit but does not require mutual Step 4: s12-16 (make note of which ones are applicable) 12 every part liable
SHARING of the profit (Young Legal Associates v Zahid) Step 5: s17 - (holding out),
In Common the parties are all in an Agency relationship (joint and Step 6: s18 - ESTOPPEL , if applicable
PROBLEMS WITH PARTNERSHIP
severable liability) (Keith Spicer v Mansell; Kang Kem v Paine)
Step 7: s20 (ss1-5) (ss3 provides law) (ss5 provides solution)
Distinguishing Joint Ventures Step 8: s39 notice of the change
Joint ventures are separate venture for each party, therefore no in common
STEP 3: Determine how Partnership was formed/ created - state which one(s) element. If it is concluded to be a partnership, then establish agency and scope of
a. Oral - Written - Under seal - Inferred by previous course of dealings
Assets are held separately as are liabilities, therefore no agency relationship agency
-Inferred by conduct -Expressly outlined in Partnership Act.
as exists in partnership. SAY: This arrangement between [APPLY] is a partnership.
Smith v Anderson -carrying on implies a repetition of acts and excludes the case of an association formed for
Capacity to be a partner
doing one particular act which is never to be repeated. That series of acts is to a series of acts which constitute a
businessThe association, then, must be formed in order to carry on a series of acts having the acquisition of gain Person of unsound mind, minors (cannot be a minor)
for their object.
Canny Gabriel - Contemporary partnership case law suggests that there may still be the carrying on of a business Salaried partners
that amounts to a partnership even though the parties are engaged in a single venture or undertaking of short
Within partnership may be important to know whether salaried partner is
duration. Young Legal Associates Is it possible for a person to be a partner in a firm, and thus liable jointly with
the other partners to creditors of the firm, if his agreement with them is not that he should be entitled to truly as a mere employee or as a partner
participate in its profits but that he should be paid by the firm a specified sum, irrespective of profits, for work to be s6 PA will matter little whether man is full partner or salaried partner
done by him on its behalf? Held: There is no minimum threshold that has to be reached in relation to a persons salaried partner is still held out as being a partner
rights to (a) profits or (b) involvement in management before he can be regarded as a partner. The question is s18: Liability extends to persons who have been held out to be partners 3 estoppel
simply whether, by their actions, the parties intended to create a partnership. requirements 1) Representation that person is a partner 2) Credit must be given to
Keith Spicer The business is carried on by the partners only if they are carrying it on in their own right. The FIRM RELATIONSHIP WITH OUTSIDERS
partners must be, and must intend to be, carrying on business as principals or proprietors. The court decided, however the firm in response to the representation 3) 3rd party must show actual reliance on the
,that B and M had been merely working together to form the company and had not been carrying on business in
RELATIONSHIP TO OUTSIDERS
representation
common with a view of profit.
Kang Kem v Paine P bankrkupt - limited ability for obtaining credit, went into agreement with GF, de-facto partners, Every partner is an agent other than a firm that is a limited partnership or
interested in opening restaurant held: pship incorporates concept of agency between partners so bound to obli in agreement incorporated ltd partnership is an agent of the firm and the other partners of
has to be common activities, rights and obligations not common interest, bank account in one persons name (no mutuality) ADVANTAGES - Setup informal and not expensive (not necessary to have a written
the partnership they each have the power to bind each other to the firm.
those elements absent = Not a partnership agreement), regulated by agreement, flexible, secrecy, no tax
Khan Miah restaurant called themselves JV Partnership in practice exists from the time they began to act as though (S8(1) PA) . This creates a fiduciary relationship among all partners. (Chan v
they were going to open the restaurant not when the restaurant actually opened Zacharia) DISADVANTAGES joint and several liability, Principle and A to each other, transfer
of shares, finance limited to partners resources, no ceiling for debt.
FORMATION OF PARTNERSHIP STEP 1: PARTNERS BOUND TO FIRM
s9 PA Any act done in the usual course of partnership business can bind the RELATIONS OF PARTNERS TO OUTSIDERS/ CREDITORS
STEP 1 : COMMON LAW rules that show Partnership is formed firm and the partners. Step 1: S8(1) Partner is bound by the acts of other partners that are carried on in the
s9(a) partner has no authority to act for firm
Partnership can be formed either expressly or impliedly and all usual way of business of the kind carried on by the firm Each partner is fiduciary of
circumstances must be examined in order to ascertain: s9(b) other person does not know/believe them to be the partner
The authority of the partners can be actual (express/implied) or
each other UNLESS:
1. Intention of Parties.
ostensible/apparent. S8(1)(a) Partner acting has no authority to act for the firm in the particular matter and
2. Sharing of profits/losses accompanied by state of agency.
3. Whether each party has voice in management.
S8(1)(b) 3RD PARTY knows that partner has no authority OR does not know or believe
STEP 2: TEST FOR LIABILITY AS FIRM TO OUTSIDERS from (Chan v Zacharia) that the partner is a partner
STEP 3: STATUTORY rules (Partnership Act) to show if Partnership is formed
Limb 1 --Authority to bind firm (s8) Mercantile Credit Co Ltd v Garrod - innocent partner liable - the sale of the car was an
Actual authority; every partner is A of others. S9 Corps Act authorizes acts act for carrying on in the usual way business of the kind carried on by the firm
In addition to the common law rules Regard shall be had to this provision if
done in usual course of partnership business will bind the other partners.
the common law elements are not sufficiently identified
 Ratification - Innocent partners still liable for actions of a partner who has acted
beyond the actual or apparent authority if they ratify the action.
Construction Engineering v Hexyl Pty Ltd undisclosed partner cannot be liable if 3RD
PARTY was not aware that undisclosed partner was a partner
Step 2: s12-16 (make note of which ones are applicable) 12 evry part liable
Step 3: s17 (holding out), s18 if applicable
Step 4: s20 (ss1-5) (ss3 provides law) (ss5 provides solution)
Step 5: s39 notice of the change
RELATIONS OF (PARTNERS TO PARTNERS)
** Partners subject to fiduciary duties (act in good faith) even after leaving
**
S22- variation by consent by terms of Partnership
S23- Partnership property of firms other than ILP
S24- property bought with Partnership money
S25- conversion into personal estate of land held as Partnership property
S26- procedure against Partnership prop 4 a partners separate judge debt
S27- rules as 2 interests and duties of partners subject to special agreement
S28- expulsion of partner
S29- retirement from Partnership at will
S30- if Partnership for term is continued, continuance of old terms presumed
S31- duty of partners to render accounts, etc; Birtchnell v Equity Trustees
S32- accountability of partners for private profits
S33- duty of partner not to compete with firm; Rochwerg v Truster
S34- Rights of assignee of share in Partnership
LIABILITY OF PARTNERS FOR TORT/CONTRACTS/CRIME
Amadio Pty Ltd v Henderson: Defines joint and several. 3RD PARTY/creditors
can choose to sue Partnerships collectively/severally to satisfy debt. No
ceiling.
Tort/crime s13(1), s15 acting in ordinary course of business where injury
caused firm liable jointly and severally
Polkinghorne v Holland; Lloyd v Grace, Smith and Co: IF claimant identifies
the person who is liable for the tort and severs them from the rest of the
partners, BUT if acting in the ordinary course of business everybody is
liable as s27(1)(b) if you are partner that causes loss to the partners
indemnify;
If contract is with firm, partners all liable - s12
RETIRING PARTNERS (S20)
Go through: s20 (ss1-5) (ss3 provides law) (ss5 provides solution)
Liability of a partner for previous actions = always liable
Wen retiring he is stopping attribution of future liability
Problem with Partnership never a true break any action that occurred
while a partner he will still be liable
INCOMING PARTNER? NOVATION - s20(5)
Allows the carry-on of debts and credits of previous firm through consent and
agreement of creditors (pure economic decision weigh up pros/cons)
DISSOLUTION OF PARTNERSHIP AND WINDING UP
1. Dissolution dissolving Partnership s40 - Notify stakeholders/creditors
Partners still owe each other a fiduciary duty during dissolution.
2. Winding up clears all outstanding debts s41 all new commercial
transactions stop parties will not bind each other as partners. BUT whatever
is related to process of winding up-partners can bind each other.
Partnership can also be dissolved through: retirement of a partner, notice
(s35(1)(c)), completion of a period (s35(1)(a)), completion of venture (s35 (1)
(b)), death (s36(1)), bankruptcy or illegality (s37(1)).
Repudiation/Anticipatory breach= auto dissolution
Court orders can also dissolve Partnerships (s38) Expansion of JV parties to include new parties must be made through
Partnership being a contract can be dissolved through anticipatory breach agreement.
S39 Rights of persons dealing with firm against apparent members of firm
Elders Pastoral Ltd v Rutherfurd; Hamerhaven Pty Ltd v Ogge TERMINATION OF JOINT VENTURE
Period of joint venture expires.
S40 Right of partners to notify dissolution Grounds specified in the agreement occur .
S41 Continuing authority of partners for purpose of winding up - Chan v JV unable to achieve goals .
Zacharia Losses resulting in continuation of the venture unviable.
S42 Rights of partners as to application of Partnership property Failure of a JV party to fulfil their obligations .
S43 Apportionment of premium if Partnership prematurely dissolved FRANCHISING
S44 Rights if Partnership is dissolved for fraud or misrepresentation
S45 Right of outgoing partner in certain cases to share profits made after Definition s9 Corporations Act K between 2 independent proprietors
dissolution franchisor/franchisee work 4 mutual benefit under common brand and system
S 46 Retiring or deceased partners share to be a debt
S 47 Rules for a distribution of assets on final settlement of account. Franchise Code of Conduct has CLAUSES not sections
Clause 5(a-d) Franchising Code of Conduct - Franchise agreement can take
form in whole or part, written, oral or implied
Clause 6 - Mandatory obligation to act in good faith towards one another
JOINT VENTURES Clause 8-11: Disclosure pre-contractual deals with For to Fee (*Fee must
confirm back to For that they have sought legal/financial advice cl10(2)].
Brian Pty Ltd v United Dominions Corp Ltd defines - JV is an association of Master Education Services v Ketchell : non-compliance with cl11(1) of FCC
persons, natural or corporate, who agree by contract to engage in some would not automatically invalidate a franchise agreement.
common, usually ad hoc undertaking for joint profit by combining their
respective resources.
Clause 13-17: On-going disclosures
United Dominions Corp Ltd v Brian Pty Ltd; Canny Gabriel Jackson Advertising Clause 26: Cooling off rights (Franchise regrets)
Pty Ltd v Volume Sales [Finance] Pty Ltd even if parties define their Clause 33: Prohibition of inducement
relationship as a JV, their relationship will be construed as a Partnership if the Clause 20: Statement cannot release Franchisor from general liability
necessary elements of a Partnership are present as JV is often abused to Clause 20(3): Agreement must not contain any waiver verbal or written
escape liability. representation made by Franchisor under clause 20
Clause 27: Breach by Fee- step1: breach step2: proposes to terminate - For
Advantages JV must give reasonable notice in writing to Fee and tell how to fix breach -30day
Hospital Products Ltd v US Surgical Corporation it is an arm lengths Dymocks Franchise System (NSW) v Todd: anticipatory breach=termination
transaction. Parties can maintain privacy, separate liability, individual sharing
by the profits, assets are owned separately, confidentiality, have their own Clause 28: No Breach by Feeagreement must give grounds for termination
undertakings, no fiduciary obligations Clause 29: Termination special circumstances For can terminate if Fee no
longer holds license, fraudulent conduct, mutual agreement
Disadvantages JV if there is a dispute they must resolve it by themselves or
go to court (no independent regulator as JV is created through K, no Act)
Types product (Franchisee manufactures product according to instruct of
Franchisor), processing/manufacturing For owns secret formula and allows
Fee to use and market that (coke, pepsi), system (large fast foods mcds,
JOINT VENTURE vs PARTNERSHIP
etc.)
JV not be a JV -would be considered a Partnership (UDC v Brian; Canny
Gabriel) test of business in common with a view to profit is satisfied.
NATURE OF THE FRANCHISE AGREEMENT
Joint Venture Partnership
One-Off Project Continuing endeavour
1. Simple Franchisor-to-Franchisee agreement
Parties are not partners, Partners in common, governed
Franchisor owns the intellectual property the Franchisee wants to conduct
governed by contract by Partnership Act
business under that model.
Parties get pre-determined Shares are determined by
shares equity unless agreed
2. Master franchise agreement
otherwise
Occurs when there is a geographical area the franchisor wants to establish
Individual liability Joint Several Liability itself but is unable to because of legal or tax or economic reasons etc.
Management of JV with a Partners are the managers, As
manager- no agency and power for each other and can bind 3. Area agreement
to bind Parties each other Franchisor allows Franchisee to open several outlets.
JV parties can sell their interest, Partnership comes to an end if
if allowed by contract partners sell share. New
Partnership agreement must 4. Joint venture
be concluded Franchisor brings in the brand and franchisee brings in capital
JV parties receive their share of Partners share profits
the profits separately
LEASING IN FRANCHISE
1. Franchisee enters into 3-way arrangement b/w tenancy agreement w/landlord and
ESTABLISHING JV franchise agreement w/franchisor
a. Lease agreement must contain a takeover clause
No statute governed by agreement. b. Problem land may not agree
JV does not possess separate legal entity . 2. Franchisor owns premises and lease is a part of franchise agreement (pay rent +
JV Parties are liable for all debts of the venture, unless an agreement to the royalties)
contrary is made. Applicable provisions from FCC.
 DISPUTE RESOLUTION
1. Every franchise agreement must set out a dispute resolution procedure that
complies with part 4 of the Franchise Code of Conduct.
2. Notification of dispute clause 40 FCC
3. Mediation clause 41 FCC
a. Office of the Franchising Mediation Advisor provides meditators for dispute
resolution
CORPORATIONS (CORPORATIONS ACT)
A Company is a separate legal entity to conduct business. Shareholders are
the owners, directors are the management of the Company (brain). Owners will
remain insulted beyond the concept of the corporate veil.
Liability of Members limited and directors owe duty to members.
Public vs Pty Ltd public is listed on the stock exchange and proprietary is
s45A of the Corps Act
Look at revenue/assets to 45A(2) small Company/45A(3) large Company
Proprietary companies must have share capital and no more than 50 non-
employee shareholders - S112(1); S113(1)
Proprietary Company can convert to public Company, vice versa
(s162;s163)
CLASSIFICATION - LIABILITY
Purpose of Company must be declared at time of registration- S117(2)(a)
Four types Section 112(1)
Companies limited by shares - Propriety and limited
Companies limited by guarantee - Not for profit companies
Unlimited companies with share capital - Rare some law firms
No liability Company - Mostly used in the mining sector
ADVANTAGES vs DISADVANTAGES OF PUBLIC CORPORATION
Disadvantages
Liquidity crunch money to lend run out trading, stocks, economic
Trading on the stock market is unpredictable
Increase the cost of doing business
Pressure to issue dividends or profits is high
Higher tax threshold
Advantages
Easy to raise capital
Integration into stock exchange
2 tests
Profit -1 million over 3 years plus money400,000 in the next 12 months
Asset -3 million in net tangible assets or market capital of money10 million
PROMOTERS
Promoter = Two contexts
Promoter is a person involved in the formation of a Company OR
Promoter is a person who actively undertake the formation of a Company
any
Promoters owe a fiduciary duty at CL Company/investing shareholders
Active promoters vs Passive promoters
Active Promoter = promote company use actions leading to registration of
company
Passive Promoter =do not actively promotegain from corp and action if
company registered
IMPORTANT = parties acting merely in a professional capacity to incorporate
the Company on behalf of a promoter are not considered promoters e.g.
solicitors, accountants etc
Aequitas v AEFC - Person representing the directing will and mind of the
promoter Company would be considered as a promoter
the directing will mind = even though company is separate legal entity cannot
take separate legal actions.
Directors control this within a Company = promoter
Tracy v Mandalay Pty Passive participants in the formation of a Company may
also be promoters.
Duties of promoters
Fiduciary duties (Promoter has a fiduciary relationship with the Company)
A person may continue to be a promoter even after the appointment of the
BOD where the directors are passive and act in the interests of the promoters
(Twycross v Grant) (IMPORTANT because sometimes promoters are very
influential)
Disclosure of interests in a contract
Erlanger v New Sombrero Phosphate - Promoters were under a duty when
forming a Company to provide independent BOD with full disclosure
Undisclosed profits
Gluckstein v Barnes Must disclose personal profit
Fundraising disclosure - Sections 709, 711 (2), 711 (3)
REMEDIES FOR BREACH
Plaintiff is Company seeks remedies from promoter if breach FD
Possible remedy of rescission Company may rescind a contract if promoters
fail to disclose their personal interests and recovery of secret profits and
constructive trust order
Liability Sections 711 (2), 711 (3), 728 (1) and 729) .
PRE-REGISTRATION CONTRACTS
CL Position: Company cannot enter into a binding agreement UNTIL after it is
registered position changed after Section 131 (VERY IMP)
Section 131.
A person may enforce a pre-registration contract against a Company if it
ratifies the contract after it is registered.
Why? Now directors of corporations know and can make an informed decision
Company will decide if pre-registration k is in their interest or not if they
ratify the Company will become an A
No responsibility will rest with the promoter pay damages
Ratification after registration Aztech Science Pty Ltd v Atlanta Aerospace
Party that enters into a pre-registration contract for a proposed Company is
liable to pay damages to the other contracting party if the Company is not
liable
A Company used to be bound prior to it being registered - in conflict with
common law
Promoters used to commit illegal actions with the burden on Company
ADVANTAGES OF A COMPANY
Members liability to contribute to the Companys liabilities is limited
Transfer of shares is relatively simple
The Company is a separate legal entity, enjoying perpetual succession
Property belongs to it, not to its member. Title to the Companys assets need
not be changed upon Company in the Companys membership
Facilities for obtaining funds either from members or lenders r greater,
especially with a public Company
Companies r longer running
Company may sue n be sued in its own name, whereas partners must sue or
be sued as individuals
DISADVANTAGES OF A COMPANY
More expense and formality is involved in the establishment,
organization and administration of a Company
Audit is compulsory
Members are not entitled to take part in management
Company is liable to pay income tax and members are also liable to pay
income tax on any distribution of Companys after tax profits.
CORPORATE PERSONALITY
Companies are vested with separate legal personality: Treated as a legal
person in its own rights, distinct from the legal personalities of its
members.
Therefore, it becomes possible for the Company rather than its members
to own assets and owe liabilities.
Solomon v A Salomon and Co: Company is a separate person w/ separate
assets
Reaffirmed in s124(1)(a)(b) Corps Act
EFFECT OF CORPORATE PERSONALITY
1. Distinct legal identity from its members
Company assumes a separate identity rom that of its members
Lee v Lees Air Farming Ltd: Company was a separate legal entity from the
deceased. Allowed insurance claim by widow.
2. Limited liability: members will not be liable for debts and obligations.
Shareholders profit from success of the Company while their personal
liability is protected by corporate veil.
3. Ownership of Property: Where a Company holds property in its own name,
this belongs solely to the Company and the shareholders have no
proprietary rights (other than for the value of the shares they hold) Makes
shareholders investments more attractive and secure
Macaura v Northen Assurance Co Ltd: M had insured timber under his
name which was destroyed, insurance Company refused to pay for the
damages by fire for the reason he had no insurable interest as it was
owned by the Company. He had insurance with the insurer, not the
Company.
4. Company can be creditor of shareholder; vice versa
5. Company can act as guarantor
6. Company can be held vicariously liable
EXCEPTIONS TO SEPARATE ENTITY DOCTRINE
Corporations = DISCLOSURE, TRANSPARENCY, NOTICE
1. Statutory Grounds Director Duties
a. S588G Directors duties to prevent insolvent trading
b. S588G(1) Directors liabilities where Company share capital
transactions cause insolvency
c. S254T Directors liability for improper dividends
d. S197 Directors liability for trustee Companys debts
2. Statutory Grounds Statutory Assumptions
Company constitution open to public inspection (Doctrine of constructive-
notice since public parties dealing with corp should know if the
constitution was duly followed) HOWEVER S130 deems Doctrine of
constructive notice is not applicable parties not taken to have info
merely b/c its available
3. Turquands/Indoor Management Rule S129Assumptions can be relied on
Royal British Bank v Turquand: people dealing with a Company can assume
that its internal proceedings have been carried out properly (designed to
protect outsiders)
Look to the statue s129(ss1-7) to see which assumptions apply. The
assumptions are not mutually exclusive (Bank of NZ v Fiberi)
S129(1) Oris Fund Management v National Australia Bank Ltd NAB could
rely on 129(1) and (4) assumptions. Held: outsiders can rely.
S129(2) person named as officer in public documents
S129(3) held out as officer/A - ANZ Bank v Australian Glass and Mirrors
S129(4) officers/As properly perform their duties
S129(5) Without Seal/S129(6) With Seal Brick and Pipe Industries v
Occidental Life Nominees; Vero Insurance v Kassem
S129(7) Ruben v Great Fingall Consolidated if someone sigs = genuine
EXCEPTIONS to Statutory Assumptions
 S128(4) KNEW OR SUSPECT assumption to be wrong-entitlement to rely on
assumptions is lost
Northside Developments Pty Ltd v Registrar-General: Transaction was outside
normal business + mortgaged ONLY asset. Held: Rule does not apply if person
dealing with Company has actual knowledge of an irregularity or is put on
inquiry by the circumstances and fails to make inquires.
Brick and Pipe Industries v Occidental Life Nominees knowledge of an A may
be taken to represent actual knowledge of the outsider.
Oris Fund Management v National Australia Bank Ltd feeling of actual
apprehension or mistrust.
Re Bugle Press Ltd: Oppression Principle case - corps law had provisions
which are designed to protect the rights of minority shareholders.
4. Common Law Agency Cases courts will disregard corporate veil to affix
responsibility if Company structure is specifically used for fraud Re Darby;
Gilford Motors Co Ltd v Horne; Jones v Lipman
AGENT acting WITHIN scope of authority binds the Principle to liability
Re FG Films if Company possesses no assets to carry out their intended
function (b/c they dont have finance, staff, management, etc.) it will be
regarded as an empty shelf = lift the corporate veil.
Smith, Stone and Knight v Birmingham Corporation: Companies may b
considered as As of their parent companies.
HELD subsidiary was carrying on parent Companys business as an A
NOTE: Treating the subsidiary Company in a group of related companies as the
A of that parent, law is effectively able to regard the group as one unit for
some purposes.
Spreag v Paeson Pty Ltd: Subsidiary made misrepresentation breached
consumer law BUT the court affixed responsibility with the holding Company.
Company was not vested with any finance sham by holding Company.
DHN Food Distributors Ltd v London Borough of Tower Hamlets 3 companies
not treated as separate entities because two subsidiaries were wholly owned
by DNH
DHN was parent Company with Bronze (land) and Transport (vehicles).
Dennis Willcox Pty Ltd v FCT Strict view of corporate personality typical in
Australiaa
E acquired dormant Company DW.
Veil might be lifted only if there was in fact a Partnership between companies
in a group, or that there was a mere faade in which Company as playing a
role, or Company had been formed or used to enable a legal or fiduciary
obligation to be evaded of fraud to be perpetrated.
FRAUD OR IMPROPER CONDUCT (LIFTING CORP VEIL)
Gilford Motor Co Ltd v Horne Court most likely to be persuaded to ignore
corporate personality in cases involving fraud or improper conduct.
Facts: Horne employed by GM, had restriction clause in contract. H left GM
and carried on own business (in wifes name) that solicited GMs customers.
HELD Granted injunction against both Horne and his Company.
Briggs v James Hardie and Co Pty Ltd Special case for lifting the veil
Briggs employee of subsidiary Company sued for negligence which caused
him injury brought action against subsidiary and parent.
Held: veil could be lifted and can sue parent if parent dominated subsidiary
to the point that it had no separate existence or alternatively the subsidiary
was formed for the purpose of circumventing the law the veil would be
lifted to enable to employee to sue the parent.
CORPORATE GROUPS
1. Each member Company is separate entity with individual rights and
liabilities
2. Each member incurs their own debts
3. Parent Company cannot claim contractual rights on Ks made by
subsidiaries
4. One member Company cannot take into account profits of other
member companies when deciding to pay dividends.
Liability Salomon Principle (each member is liable for its own actions)
Directors to act in best interest of Company rather than interests of the
group Walker v Wimborne - wholly owned subsidiaries the situation is easier
s187
Corporations Act treats a group as a unit in cases of:
Section 259B taking security over its own shares.
Section 259C - invalidation of Companys acquisition of shares in a Company
that controls it (void unless grounds on such transfer is allowed)
Section 260A Financial assistance (prevents hostile tak- over)
Section 46 3 Rules for determining whether a corporation is a subsidiary of
another
Section 49 where the Principal is itself a subsidiary
Section 47 provides tests in which composition of subsidiary is taken to be
controlled by Principal.
HOLDING and SUBSIDIARY COMPANIES
AASB 10 requires a controlling entity to present consolidated financial
statements (of all group companies)
Holding and subsidiary Company classification (effect of sections
260A(1), 588V 588X, 202B) talks about directors duties
Subsidiary is defined in Section 46. Important issues:
Control of composition of board
Position to cast or control majority votes
Holding more than half issues capital
Ultimate holding Company, wholly-owned subsidiary and related
bodies corporate.
Holding companies do business through companies because their operating
position is strong. Use their strength to guarantee the contractual
obligations of the subsidiaries. DISTINGUISH FROM COMPANYs
SHAREHOLDERS USING PERSONAL GUARANTEE (exposing themselves). If
there is a dispute the beneficiary will secure the guarantee. Contractors
position weakened because they lost the guarantee and need to rectify K.
NOTE: Holding Company will not be happy b/c operating position will be
effected by the encashment of the guarantee (appears in the books/effects
stock price).
Qintex Australia Finance Ltd v Schroders Australia Ltd: Corporations are
liable separately even if they are in a group.
Insulating Parent from subsidiary Companys risk Briggs v James (on left)
Australian case law provides no basis on which limited liability of a parent in
a subsidiary should be relaxed the only option is to lift the corporate veil.
Veil cannot be lifted due to the partys wishes. DandJ Construction v Head
DIRECTING MIND and WILL OF A COMPANY
The law dealing with the mind and will of a Company will consider
imprisonment for the director or the Company officer that had acted illegally.
Company cannot be imprisoned, only subject to pecuniary penalties (fines).
Actions of the directors are attributable to the Company:
because they are the mind and will of the company. Lennards Carrying Co v
Asiatic Petroleum Co Ltd:
Knowledge of an officer is equivalent to the knowledge of the Company b/c it
is in accordance with legislative intent of the Corps Act.
Meridian Global Funds Management Asia Ltd v Securities Commission
Lord Denning analogy brains of the Company = directors or managers
vested with directorial authority, hands are employees
Servants - Bolton Engingeering v Sons:
As Management Tesco Supermarkets v Nattrass store manager = hands,
Tesco avoided liability b/c they took all reasonable actions + precautions.
Negligence of the employee cannot be attributable to Tesco.
Company Officers (Secretary) - Donato v Legion Cabs Company sued for
defamation due to untrue statements published by secretary attributable to
the Company.
Change in Control - FCT v Whitfords Beach Pty Ltd attributable to the
Company as it was the Companys intended purpose (determined by brains).
The Mind and Will of More than One Person Brambles Holdings v Carey
replacement driver did not follow procedure; overloaded truck. Company did
not follow internal rules of communication. Once the rules are followed the
Company is taken to know.
Aggregated knowledge Re Chisum Services information known by several
people can be attributed to the Company.
CRIMINAL LIABILITY
Companies are subject to criminal law which means it must have mens rea
behind the crime, but they cannot be imprisoned. However, they can be found
guilty and fined under the criminal code.
Under s12(2) CC actions by As, employees amount to actus rea.
Tesco Supermarkets v Nattrass actus rea cannot be committed by an
abstract entity, but rather by the hands of the Company.
Corporations Act specifies offences that are:
SLO Strict Liability (s6.1(1)(a)) Defence of mistake available
ALO Absolute Liability (S6.2(1).
TORT LIABILITY
Companies can be vicariously liable for torts committed by employees.
Company as a Principle is liable for the torts committed by its A acting within
their scope.
(Lloyd v Grace, Smith and Co)
Daniels v anderson Company awarded damages due to negligence of
auditors. Two grounds: the Company was vicariously liable for the negligence
of its management. Also, liable because the directors almost wholly
delegated the task of the action in which it failed to monitor or control
S128(3) Entitled to rely on assumptions (s129) even where there is fraud.
CONTRACTUAL LIABILITY
An individual acting with Companys express/implied authority may contract
on its behalf (common seal is no longer necessary)
Company can also make a contract directly by executing a document
Statutory assumptions under S129(5)and(6) protect outsiders especially
when dealing with one-person companies.
COMPANIES and AGENCY
s126 allows a Company to contract through As
Law is regulated through s128-130 and the common-law rules on agency
 Actual Authority
1. Authority may arise expressly or impliedly
(National Australia Bank v Sparrow Green Pty Ltd. - only signed by
single director but needed 2)
2. Company actually authorises an A to act on its behalf - Actions of
that A will bind the Company if acting within scope of authority.
3. If acting outside scope Company is not liable. Agent personally
liable
Note: Practical lesson in advising Company delegation of authority
to A must be drafted very specifically and precise or As action will
bind Company
APPARENT/ OSTENSIBLE AUTHORITY
However, a principal cannot simply be bound in contract on mere
representations of the Agent.
Brick and Pipe Industries v Occidental Life Nominees : Director was taking to
have implied actual authority (controlling shareholder/managing director)
Actions not approved by the board, but no attempt made to interfere with the
assertion of control, and the Company was bound.
Customary Authority - occurs where there is a party claiming authority on the
basis of positions (directors, managing directors, marketing directors, CFO,
Company secretary) Brick and Pipe
Agency/Companies: Panorama, Freeman, Mercantile, First Energy, Pacific.
SHARES
Ownership of shares = profits distributed by Company as dividends
Subject to constitution, shareholders participate in Company management
Several types: (controlled discrimination)
Ordinary shares (1 dollar per share and you get one vote)
Preference shares S254A(2) - certain privileges attached, most important in
the event of winding up or buy back there will be special treatment given
Redeemable preference shares s254A(3) and 254J - redeemed by the
Company at a later date (original agreement). Shares can only be redeemed
only out of proceeds, or proceeds of fresh issuance of shares.
Founders/Deferred shares issued to 1st time investors
Transfer of Shares - Shares can be traded as they are a tangible property.
Dividends - Paid on return of profit by the Company. Cannot be paid from
borrowing money from a bank.
Directors liability for issued dividends = lift veil if breached Section 254T
General rule if Company remains solvent then dividends can be issued.
SHARE CAPITAL
Shares = source of corporate finance. Shareholders acquire shares and when
business is successful = dividends issued. Corps can raise money in other ways
(issue debentures, lease assets, mortgage assets, credits).
Public companies use stock exchange to raise capital. Generally there is no
limits on issuing shares.
S254B terms/rights of issued shares (must be in form of no liability/others)
S254C no par value of the share (must have a certain number of shares)
Share issuance is determined through factors such as market value, value of
business, fairness between existing and new members, marketability.
CAN THE SHARE CAPITAL BE ALTERED? (VARIATION OF SHARES)
Alteration of share capital is always regulated b/c deals with money. Whenever a
buyback occurs the share is cancelled. Illegal to buy back shares and give them
to another shareholder.
S254HConverting shares into larger or small number
(1) General rule alteration of capital is permitted but the resolution is to be
passed at a general meeting (board of directors plus shareholders and creditors)
(2) conversion takes effect, on the day of resolution or specified date.
(3) Unpaid amount divided equally any amount unpaid on shares being
converted is to divided equally amongst the replacement shares.
(4) giving copy of resolution to ASIC, it will be a strict liability offence if dont.
S256A rules to be followed a Company for reduction in share capital and share
buyback.
These rules are designed to protect the interest of shareholders and
creditors by addressing the risk of these transactions leading to companies
insolvency.
S256B reduction of share capital when not otherwise authorized.
(1) A Company may reduce its share capital in a way that is not authorized by
law if the reduction operated and concurrent requirement:
(a) Fair and reasonable to the Companys shareholders as a whole and
(b) Does not prejudice the Company ability to pay its creditors and
(c) is approved by shareholders under s256C.
REDUCTION OF SHARES
S256B(3) Selective reduction unfair to certain class of shareholders.
S256B(2) The reduction is an equal reduction if concurs with (a)(b)(c).
S256C PROCESS shareholder approval.
Section 256D consequences.
SELF ACQUISITION (BUY-BACK)
Company like a buy back prejudice interest of shareholder/controversial
S259A Prohibits acquisitions of shares 4 exceptions
PERMISSIBLE BUYBACKS (10/12 RULE)
S257B Buyback is only allowed if creditors interests are not prejudiced
S257B(2) Equal access scheme conditions to be satisfied
S257B(4) 10/12 (10 percent over 12 months) limit is exceeded if the buy-back
would result in shares carrying more than 10 percent of the smallest number of
votes attached to voting shares at any time in the last 12 months were bought
back during that 12 months.
S257B(5) Exceeding the 10/12 limit.
-Proposed buyback will exceed 10/12 limit if the number of votes attaching to all
the voting shares in the Company that have been brought during 12 months and
the voting shares will be bought back if the proposed is made would exceed the
10/12 limit. (law is saying 10/12 is exceeded)
S257C buyback procedure, shareholder approval if the limit is exceeded
(1) 257B applies this section to a buyback, the terms of the buyback agreement
must be approved before it is entered into by a resolution passed at a general
meeting of the Company.
(2) Information to a Company notice of meeting (shareholder must have notice of
the buyback voting) the law is giving the Company a way out.
(3) ASIC must receive a copy of the documents
LIMITS OF COMPANIES DEALING IN THEIR OWN SHARES
Financial assistance - Designed to stave off hostile takeover. Normally
corporate groups do this (transfer money to a sister Company)
Prejudices the interest of shareholders and creditors, therefore law puts
limits on it.
Step 1: S260(A) the procedure of financial assistance
Step 2: Shareholder approval needed (S260B (1) (7) and S260C) 260B- focus
on (1)(2)(3)
(1) Person who is acquiring the share doesnt vote, special resolution or a
resolution agreed to at a general meeting at all ordinary shares.
(2) If the Company becomes a subsidiary of a listed corporation, the
financial assistance must also be approved by special resolution passed at
a general meeting of that corporration (need 2 special resolution)
(3) Group scenario, where there is a holding Company and a series of
companies, if financial assistance affects the group, then the group will
have to do this.
Step 3: S260C (1-5) exempts financial assistance from operation of S260A
260C = exemption's when you would not bother with this process.
(1) If it is ordinary commercial dealings you do not need approval.
(2) Share by instalment dont need approval.
(3) Banks are not bound by 260A.
(4) Financial assistance is exempted from 60A if a Company is a subsidiary
of a borrower.
(5) Financial assistance is a guarantee.
Step 4: S260D(1) consequences and (2). Corporation is not guilty. Financial
assistance is valid. Persons responsible held guilty for breaching s260D(2).
ASSOCIATIONS
UNINCORPORATED ASSOCIATIONS
1. Any group of persons who have agreed to join together in the pursuit of
one or more common objects or purposes. Smith v anderson:
2. Criteria to determine if it is an association Adamsons Case;
s4(1)and(5)AIA
3. Must have engaged in social, religious, educational pursuits
4. Profit making per say is not prohibited as long as the profit is not for the
pecuniary gain of the member IF IT IS pecuniary gain for members
DQ of unincorporated + association transitions into JV.
Conservative and Unionist Central Office v Burrell outlines the characteristics
as follows:
CHARACTERISTICS OF ASSOCIATIONS
(1) There must be members of the associations.
(2) There must be a K binding the members.
(3) There will normally b some constitutional arrangement for meetings of
members and appointment of committees and officers.
(4) A member will normally be free to join or leave the association at will.
(5) The association will normally continue in existence independently of any
change in composition; and
(6) The must be a historical moment in time when a number of persons
combined or banded together to form the association.
NOTE: For an unincorporated association, 1, 2 and 6 are essential.
EFFECT OF UNINCORPORATED ASSOCIATIONS RULES
General presumption (rebuttable) that rules of an association do not create a
contractual right (Cameron v Hogan)
Except when proprietary rights are involved; OR there is an express term in the K 4. Perpetuity P is done through in novation (type of K, not just limited to P, novation can be used in
that states you are entering into contractual obligation (problem-If you bring in 5. Members have limited liability (s. 27) a lot of other different types of K ex: vehicle leasing). If you try to sell shares the P ends.
contractual obligations people will not join).
C simply through selling shares.
RIGHTS/ DUTIES OF MEMBERS
Disadvantages (additional responsibilities)

1. Entry Criteria: Governed by Prs of freedom of association but also 1. Expenses, formalities, insurance requirements Formalities and expense
governed by public policy (cannot discriminate), public safety laws. 2. Keeping of separate accounts, financial returns (cost)
P one of the problems, is that all parties have to contribute the stated capital, there is
Cannot b for unlawful purposes.
Not-for-Profit: s5 Associations Incorporations Act qualified by s4 no flexibility of partly or unpaid shares. Every partner must contribute through their own
2. Membership Rights: express or implied - a common understanding or
An association is not eligible for incorporation under this Act if the association is pockets.
constitution. Upon joining a member implicitly or expressly agrees to be C - spends through its own capital.
bound. Individual liability.
formed or carried on for the purpose of providing financial gain for its members . . .

3. Suspension/Expulsion: Cameron v Hogan If you are looking for a K

argument then you need to incorporate this expressly in the foundation Procedure to Incorporate Disclosure requirements
document. Members do no longer retain the right to membership: P must disclose to each other, owe duty of care. Closed form of doing business, no
bankrupt, mentally unsound, commit a crime, failed to attend certain
1. Choose name (must use Inc. s. 29 unless exempt under s. 33 ) registry where you lodge . Even if u go to the bank for a loan, you lodge info to bank,
meetings.
4. Enforcement of rights: The Constitution is an agreement between the
2. Design constitution and rules (Part 5 ). but this will be confidential.
members BUT - Cameron v Hogan founded that relationship was generally 3. Lodge application.
consensual and not contractual. 4. Appoint secretary. C disclosure is made through a public regulator (has oversight). Problem with
5. Provide registered address.
5. Contractual Relations.
disclosure, all disclosure made to the regular are a matter of the public record (easy for
public to get access). Transparency requirements. Actually developed through CL rules,
Ongoing requirements
General: Ordinary members of an unincorporated association are not liable then consolidated in Statute Fordes
for contracts made on their behalf by any member, the executive or the
committee of the 1. Lodge details of any changes.
association. 2. Keep adequate accounts, Hold annual general meeting, Concept of disclosure is basically an agreement between the society itself and the
EXCEPTIONS TO DUTIES of Associations/ Clubs 3. Lodge annual financial return. Company. The privilege of limited liability in exchange for transparency. The concept
4. Committee members must comply with duties, of limited liability can be abused if not regulated. Over a period of time you will see
1. Members are liable if any K is with all of the members, or with an A or
5. Rules form the terms of contract between association and members that these rules, most of these have developed through case law. and you will see
trustee acting within authority ( Freeman v McManus).
(Cameron v Hogan) will be displaced, and the rules are of K agreements that most of them are a relic of a previous era.
2. Committee members acting within authority will be personally liable on of members. Audit Partnership dont usually have to do.
the contracts they have entered into (Bradley Egg Farm v Clifford) 6. Separate legal entity to its members (body corporate) s21 AIA,
7. Popular with Similar rules to Corporations Act apply to incorporated Size limitation
3. However, this may not be the case when the contract is for a long term associations.
and the composition of the committee changes Carlton Cricket and C if a Company goes above a certain size (s 45A (2)) large proprietary corporation or if it
Football Social Club v Joseph. has a certain capital or asset (asset test) it would be required to register of a public
corporation.
NOTE: Basis of difference between Carlton Cricket and Bradley Egg Farm COMPANY vs PARTNERSHIP Public corporation = regulation and oversight, the word public, deals with members of the
= single act in Bradley while Carlton Cricket concerned actions spanning more
than 21 years. public at large. Therefore, their interests need to be protected.
Separate legal entity- Partnership is not an entity unlike a Company

TORT LIABILITY (Associations/ Clubs) Nature of the organization Raising capital

1. Committee members liable if tort occurs during activities of association
P -owns the business, they manage it themselves. decision making is through C advantage, capital can be raised by 2 ways. Debt capital or share capital. Issues
(public policy rule). consensus. shares raise capital. List on the stock exchange, raise capital (subject to transparency and
C shareholders are not apart of the decisions making process. regulatory requirements). Can also take a loan in a C but the C takes out the loan not the
2. If the committee is empowered to pursue activities that caused the
Liability: P liability is unlimited C liability is limited shareholders. Sometimes bringing in a new shareholder may cause problems to the
tort.
existing shareholders, as the profit margin may reduce.
3. Committee members can get indemnity from other members of the club.
Enforcement of legal rights P - problem, you cannot issue shares, as if you do you are dissolving the Partnership as
4. Membership of unincorporated association does not automatically
C enforces its own rights P there is a duality. The P owe duties to each other, and you are bringing in a new partner. Any time you run short of money, either the existing
create a DOC. any DOC must be established on ordinary Principles of
negligence (Hrybynyuk v Mazur) Ps owe a duty collectively to 3rd parties with an unlimited liability partners have to contribute through their own pocket, or you bring in someone new, or you
take out a loan which may create debt obligations.
INCORPORATED ASSOCIATIONS
Duration of existence
Relevant where associations incorporate as a separate entity.
2 OPTIONS: Incorporated Association (OR) Not-for-profit P may continue until dissolution. Change in P means the P is dissolved. Taxation
C have perpetual existence. The C only die (liquidated) if the process of liquidating is C taxed differently from its shareholders. Share income will be considered the individual
Advantages followed. Statutory process. income of a shareholder.
1. Association has separate legal entity (ss. 21 and 25): P each partner pays tax individually.
2. Can own property in own name
3. Can sue and be sued in own name Transfer of interest (The shares is the transfer of interest)