Liability Of The Principal From Answers

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• Subject Name : Law

Applying Legal Principles in Corporations And Trust Law - Answer 1

Answer 1.1

Each court and tribunal bring about the end of their proceedings with a formal pronouncement of the results. In court, it is termed as 'judgement’ and in tribunals of Australia it is called ‘decision.’[1]

The reasons for this are three-fold[2]. First, to give an explanation on how the decision is made and why is it made. Second is to improve for the betterment of the government. It is the major reason why is it made into writing is to improve the quality of it. The third reason is not applicable on the Supreme Administrative Court but is applicable on Central Administrative Court and Regional Administrative Courts. It is a medium to make the higher courts like the Supreme Administrative Courts to understand the viewpoint of the lower ones.

Answer 1.2

Standard of Proof  is the extent to which the parties must prove for their case be succeeded[3]. The burden of proof is the ‘onus’ which the party needs to prove that the standard which he is setting is the right one. For example in any criminal proceeding, the prosecution has the burden of proof and that it has to prove 'beyond reasonable doubt' that the case is against the defendants. This is the standard.

Applying Legal Principles in Corporations And Trust Law - Answer 2

Answer 2.1

It was held that the cricket club did not breach its duty. For breach of duty, the following factors need to be considered[4]-

1. The possibility of the harm
2. Was it obvious of the defendant to take precautions in cost and efforts wise
3. Does the defendant is into social services which could be useful?

Answer 2.2

This is a vicarious liability when the employer of the business is responsible for the acts of its employees.

Applying Legal Principles in Corporations And Trust Law - Answer 3

Answer 3.1

It is a form of doing business where the person gets to choose which kind of structure would it like to set up for his franchise. This includes a sole proprietorship, a partnership, a company, a two-tiered company or a trust[5].

Any franchise's sale and the offer is regulated by a Code under the Competition and Consumer (Industry Codes-Franchising) Regulation 2014. This is carried out under the Competition and Consumer Act 2010. It is a federal Act and covers all states and territories[6].

Answer 3.2

Incorporation of any business is not compulsory but if done, then it has to abide by the norms and regulations of it. This is a subjective approach is depended on factors like memberships, not-for-profit status, legal status, legal protection of members etc.[7]

Applying Legal Principles in Corporations And Trust Law - Answer 4

Answer 4.1

Such companies are established and registered as companies but have no assets or liabilities and have no actual business that it deals into. They are formed just to offer a veil in front of the government. They sell the registered companies to somebody to lighten themselves from the burden of getting themselves registered.[8]

Answer 4.2

Three things that have to be recorded by companies to the ASIC are-

1. As per section 292 of the Corporations Act 2001, all companies like the public companies, the companies limited by guarantee, all disclosing entities and all large companies that are not disclosing entities, all the registered managed investment schemes etc should prepare financial reports and submit them to the ASIC at the end of each year.
2. As per section 295(2) and 296(1) of the Corporations Act 2001, statement of profit and loss and another list of incomes for that year
3. As per Section 298-300A, report of the director and also the declaration of auditor’s independence.[9]

Applying Legal Principles in Corporations And Trust Law - Answer 5

Answer 5.1

As per section 204A(2) of the Corporations Act 2001, every public company must have one company secretary at least and one of such a company secretary must live in Australia. A proprietary company is not required to follow such instructions as per section 204A (1). But if he does have one or more of them, one of them has to be of Australia. [10]

Since secretaries fall under the head of the officer as per Section 9 of the Act, so they have the same obligations of that of the directors. These are-

1. As per section 180, they have to carry out their duties with the utmost due care and diligence.
2. As per section 181, they have to carry out their duties and powers in good faith.
3. As per section 182, not use any of their position for the gain or advantage for themselves or somebody
4. As per section 183, not to use any of the information received improperly for their own benefit or in the pretext of their position.
5. As per section 184, if a company secretary is intentionally dishonest and irresponsible and fails to abide by the regulations of the Act and not work in good faith in the interest of the company, then he shall be criminally liable.[11]

In Panorama Development (Guilford) Ltd v. Fidelis Furnishing Fabrics Ltd, [12]the secretary of the company went beyond what was authorised to him. He was not authorised to hire motor vehicles for the plaintiff, which he did. So the issue was can the company who was the defendant could be liable for the transaction. So as per the principle of vicarious liability, the defendant was responsible as it was them who hired the company secretary. The secretaries were given the authority to enter into any transaction with which they were involved. The hiring of motor vehicles was a part of their business and hence they were also liable.[13]

Answer 5.2

The difference is[14]-

Applying Legal Principles in Corporations And Trust Law - Answer 6

Answer 6.1

The degree of skill required by the executive director compared to the non-executive director is subjective. The non-executive ones are not into providing constant attention to the affairs of the company. They are only required at periodic board meetings or any board meeting where the director of the company is present.[15] 

Answer 6.2

if a company thinks it is in the best interest of the company to go in any related party transaction, they need to consider that whether any member approval is required or not as per Chp 2E and they must also consider checking whether it does not fall under the exception of section 210 of the Corporations Act 2001. Section 210 states that the approval of member is not required if the company and the related party are dealing at arm’s length or any terms less favourable to the terms of the related party[16]. 

Applying Legal Principles in Corporations And Trust Law - Answer 7

Answer 7.1

A company can do that-

1. In order to create reserves that are distributable and/or to get rid of any losses, any surplus capital return to shareholders, to help a buyback to redeem the shares or asset distribution to the shareholders.
2. It can also be done to save themselves from the liability to pay any unpaid share capital.[17]

Answer 7.2

There are 3 ways to do that-

1. Conversion by Default
2. Conversion by Operation of Law
3. Conversion by Choice or By Option

Applying Legal Principles in Corporations And Trust Law - Answer 8

Answer 8.1

These are-

1. Administration- it starts when the directors of the company send a resolution that a company is or maybe become insolvent.
2. Liquidation- it can be the initial step to insolvency.
3. Receivership- it is not started by the directors. Usually, it is the decision of the lender who has security over the company's assets.

Answer 8.2

The company chooses receivership when a receiver who is an independent and reasonably qualified person is hired by the secured creditor, or on distinctive situations by the court, or to have authority over all assets of the company.[18]

Applying Legal Principles in Corporations And Trust Law - Answer 9

Answer 9.1

Since there is no legal obligation for a sporting club to be incorporated, however, many clubs choose to be one. It could be under state or territory legislation like The Associations Incorporations Act or under federal law like The Corporations Act 2001. The advantage of it is that the members of the club owe limited liability. Hence if Jack wants to sue the club for negligence so it better be unincorporated because if incorporated then, he does not have any claim. In Carlton Cricket and Football Social Club v. Joseph,[19]the club was unincorporated and hence individuals working in it were held to be liable.[20]

Answer 9.2

Such organisations do not work for any profits or any personal gain or any personal benefit for the members of the company. For example like the self-help groups. 

It means it does makes profits but that profit is not used for the members and the people who work in it but for the betterment of the people. They could provide direct benefits like distribution of gifts and money to the needy or any indirect benefit like any member of the organisation being helped as the company works in it.

It is established to help society and to work for the betterment of the people and help those who are needy.

Applying Legal Principles in Corporations And Trust Law - Answer 10

Answer 10.1

A trust deed is a document which levies out the rules for establishing and operating any fund. The deed comprises of fund objectives and who can be a member of this trust and how shall the benefits be distributed in a lump sum or any way else[21].

The purpose of it the transference of the title of the property. It is a legal document that gives the ownership of the property in the name of the trustee. To make it binding in the court of law, it has to be filed by any local government officer in the public record, whose job is to manage such documents.

Answer 10.2

As per section 272-5(1) of Income-tax Assessment Act 1936, it defines that where a beneficiary is given the indefeasible interest in the income of the trust, that the trust incurs, that is called fixed instalment to that respective share and income.

As per section 275(3) (b) of Income Tax Assessment Act 1936, the Commissioner, to decide whether a person has a fixed entitlement shall give regard to[22]-

1. Situations where the entitlement is not possible, or
2. That the entitlement is not possible, or
3. The kind of trust.

Applying Legal Principles in Corporations And Trust Law - Answer 11

Answer 11.1

To set up an SMSF, it is not an easy task, one needs to be full-fledged informative about it to come to this conclusion. The steps to involve this process is[23]-

1. choose whether one wants an individual trustee or corporate trustee
2. chose these respective trustees
3. then one has to create a trust and trust deed of it
4. check your fund in the Australian super fund
5. register that fund to get an ABN
6. set up a bank account
7. get the address of an electronic service
8. devise an exit strategy

If this can be resolved by the person, then he should opt this option of opening an SMSF. As for Lisa, if she can devise all such things then she should establish her own SMSF.

Answer 11.2

My Super Funds is the type of accounts that can be eligible for super funds. It is a default kind of account in which the employer is entitled to pay the super, until and unless the employee had opted for some other kind of account[24].

There are various categories of it-

1. Retail Super Funds

They are run by the banks and the investment companies.

2. Industry Super Funds

Such kind can be joined by anyone. Smaller ones are eligible for those who work in a certain kind of industry like health.

3. Public Sector Super Funds

These are especially for government employees only.

4. Corporate Super Funds

They are made by the employer for their employees.

5. Self Managed Super Funds

These are those where the employee tries to make his own kind of super fund.

Bibliography for Liability of the Principal from the Perspective of Law

Online Sources

Administrative Appeals Tribunal, ‘Writing reasons for judgement and decision.’ (May 2007). <https://www.aat.gov.au/about-the-aat/engagement/speeches-and-papers/the-honourable-justice-garry-downes-am-former-pres/writing-reasons-for-judgment-or-decision >

ICLR, ‘Burden and standard of proof.’ (2020). < https://www.iclr.co.uk/knowledge/glossary/standard-and-burden-of-proof/#:~:text=The%20standard%20of%20proof%20is,requirement%20to%20satisfy%20that%20standard >

Law Teacher, ‘Bolton v Stone 1951.’ < https://www.lawteacher.net/cases/bolton-v-stone-1951.php#:~:text=In%20this%20case%2C%20thethe%20likelihood,useful%20service%20to%20the%20community>

Bianca Reynolds, ‘What franchise business structure is best for a franchisee?’ (May 2019) < https://legalvision.com.au/franchise-business-structure-best-franchisee/ >

Robert Toth, ‘Franchise 2020- Laws and regulations.’ (Oct 2019) < https://iclg.com/practice-areas/franchise-laws-andregulations/australia#:~:text=The%20sale%20and%20offer%20of,States%20and%20Territories%20in%20Australia.>

Consumer Affairs Victoria, ‘ Should your club incorporate?’ (Sept 2020) <https://www.consumer.vic.gov.au/clubs-and-fundraising/incorporated-associations/become-an-incorporated-association/should-your-club-incorporate >

Nadine Martino, ‘What is a shelf company?’ (Sept 2020) < https://legalvision.com.au/shelf-company/#:~:text=A%20shelf%20company%20is%20a%20business%20that%20has%20been%20registered,of%20registering%20a%20business%20themselves.> 

Australian Securities & Investments Commission, ‘Lodgement of financial reports.’ (Oct 2018) <https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/lodgement-of-financial-reports/ >

Australian Institute of Company Directors, 'Role of the company secretary.' (Jan 2013) < http://aicd.companydirectors.com.au/resources/all-sectors/roles-duties-and-responsibilities/role-of-the-company-secretary?no_redirect=true >

Law Teacher, ‘Liability of the Principal from the Perspective of Law.’ (Jun 2019) <https://www.lawteacher.net/free-law-essays/commercial-law/liability-of-principal-from-perspective-of-law-commercial-law-essay.php >

Richard Bryan, ‘Management vs Ownership.’ (Jan 2015) < https://www.nurserymag.com/article/nm0215-strategic-ownership-business-tips/ >

Australian Institute of Company Directors, ‘The differences between executive and non-executive directors.’ (2015) <https://aicd.companydirectors.com.au/resources/all-sectors/the-differences-between-executive-and-non-executivedirectors#:~:text=The%20degree%20of%20skill%20required,the%20affairs%20of%20the%20corporation>

Australian Securities and Investments Commission, ‘Related party transaction.’ (Mar 2011) < https://download.asic.gov.au/media/1239851/rg76-published-11-may-2011.pdf >

[1] Apple By Global, ‘Bermuda: Reducing Share Capital By A Company: An Overview.’ (Mar 2015) <https://www.mondaq.com/offshore-financial-centres/379174/reducing-share-capital-by-a-company-an-overview#:~:text=In%20our%20experience%2C%20creating%20distributable,company%20reduces%20its%20share%20capital.&text=Although%20it%20is%20relatively%20unusual,to%20shareholders%2C%20it%20does%20happen. >

Australian Securities and Investments Commission, ‘Receivership: A guide for creditors.’ (Dec 2008) <https://www.kordamentha.com/getmedia/0ff15fb1-e118-4f05-9044-f7d0ce803514/ASIC-Info-Sheet-54-Receivership-Guide-for-Creditors#:~:text=The%20purpose%20of%20receivership,all%20of%20the%20company's%20assets. >

Annie E Leeks, Prudence J Smith, Mitchell J O'Connell & Lachlan J Green, 'Organization of a sports club and sport governing bodies.' (Dec 2019) <https://thelawreviews.co.uk/edition/the-sports-law-review-edition-5/1211682/australia >

Australian Taxation Office, ‘Type of trust.’ (Feb 2019). < https://www.ato.gov.au/Forms/Trust-tax-return-instructions-2014/?page=25 >

Australian Taxation Office, ‘Income Tax Assessment Act 1936.’ (2020) < https://www.ato.gov.au/law/view/document?docid=PAC/19360027/Sch2F-272-5 >

Australian Taxation Office, ‘Setting up.’ (Feb 2018). < https://www.ato.gov.au/super/self-managed-super-funds/setting-up/ >

Money Smart, ‘Types of Super funds.’ (2020) < https://moneysmart.gov.au/how-super-works/types-of-super-funds

Case Laws

Panorama Development (Guilford) Ltd v. Fidelis Furnishing Fabrics Ltd (1971) 3 ALL ER 16

Carlton Cricket and Football Social Club v. Joseph (1970) VR 487.

[1] Administrative Appeals Tribunal, ‘Writing reasons for judgement and decision.’ (May 2007). <https://www.aat.gov.au/about-the-aat/engagement/speeches-and-papers/the-honourable-justice-garry-downes-am-former-pres/writing-reasons-for-judgment-or-decision >

[2] Ibid 1

[3] ICLR, ‘Burden and standard of proof.’ (2020). < https://www.iclr.co.uk/knowledge/glossary/standard-and-burden-of-proof/#:~:text=The%20standard%20of%20proof%20is,requirement%20to%20satisfy%20that%20standard >

[4] Law Teacher, ‘Bolton v Stone 1951.’ < https://www.lawteacher.net/cases/bolton-v-stone-1951.php#:~:text=In%20this%20case%2C%20thethe%20likelihood,useful%20service%20to%20the%20community>

[5] Bianca Reynolds, ‘What franchise business structure is best for a franchisee?’ (May 2019) < https://legalvision.com.au/franchise-business-structure-best-franchisee/ >

[6] Robert Toth, ‘Franchise 2020- Laws and regulations.’ (Oct 2019) < https://iclg.com/practice-areas/franchise-laws-andregulations/australia#:~:text=The%20sale%20and%20offer%20of,States%20and%20Territories%20in%20Australia.>

[7] Consumer Affairs Victoria, ‘ Should your club incorporate?’ (Sept 2020) <https://www.consumer.vic.gov.au/clubs-and-fundraising/incorporated-associations/become-an-incorporated-association/should-your-club-incorporate >

[8] Nadine Martino, ‘What is a shelf company?’ (Sept 2020) < https://legalvision.com.au/shelf-company/#:~:text=A%20shelf%20company%20is%20a%20business%20that%20has%20been%20registered,of%20registering%20a%20business%20themselves.> 

[9] Australian Securities & Investments Commission, ‘Lodgement of financial reports.’ (Oct 2018) <https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/lodgement-of-financial-reports/ >

[10] Australian Institute of Company Directors, 'Role of the company secretary.' (Jan 2013) < http://aicd.companydirectors.com.au/resources/all-sectors/roles-duties-and-responsibilities/role-of-the-company-secretary?no_redirect=true >

[11] Ibid 10

[12] (1971) 3 ALL ER 16

[13] Law Teacher, ‘Liability of the Principal from the Perspective of Law.’ (Jun 2019) <https://www.lawteacher.net/free-law-essays/commercial-law/liability-of-principal-from-perspective-of-law-commercial-law-essay.php >

[14] Richard Bryan, ‘Management vs Ownership.’ (Jan 2015) < https://www.nurserymag.com/article/nm0215-strategic-ownership-business-tips/ >

[15] Australian Institute of Company Directors, ‘The differences between executive and non-executive directors.’ (2015) <https://aicd.companydirectors.com.au/resources/all-sectors/the-differences-between-executive-and-non-executivedirectors#:~:text=The%20degree%20of%20skill%20required,the%20affairs%20of%20the%20corporation>

[16] Australian Securities and Investments Commission, ‘Related party transaction.’ (Mar 2011) < https://download.asic.gov.au/media/1239851/rg76-published-11-may-2011.pdf >

[17] Apple By Global, ‘Bermuda: Reducing Share Capital By A Company: An Overview.’ (Mar 2015) <https://www.mondaq.com/offshore-financial-centres/379174/reducing-share-capital-by-a-company-an-overview#:~:text=In%20our%20experience%2C%20creating%20distributable,company%20reduces%20its%20share%20capital.&text=Although%20it%20is%20relatively%20unusual,to%20shareholders%2C%20it%20does%20happen. >

[18] Australian Securities and Investments Commission, ‘Receivership: A guide for creditors.’ (Dec 2008) <https://www.kordamentha.com/getmedia/0ff15fb1-e118-4f05-9044-f7d0ce803514/ASIC-Info-Sheet-54-Receivership-Guide-for-Creditors#:~:text=The%20purpose%20of%20receivership,all%20of%20the%20company's%20assets. >

[19] (1970) VR 487.

[20] Annie E Leeks, Prudence J Smith, Mitchell J O'Connell & Lachlan J Green, 'Organization of a sports club and sport governing bodies.' (Dec 2019) <https://thelawreviews.co.uk/edition/the-sports-law-review-edition-5/1211682/australia >

[21] Australian Taxation Office, ‘Type of trust.’ (Feb 2019). < https://www.ato.gov.au/Forms/Trust-tax-return-instructions-2014/?page=25 >

[22] Australian Taxation Office, ‘Income Tax Assessment Act 1936.’ (2020) < https://www.ato.gov.au/law/view/document?docid=PAC/19360027/Sch2F-272-5 >

[23] the Australian Taxation Office, 'Setting up.' (Feb 2018). < https://www.ato.gov.au/super/self-managed-super-funds/setting-up/ >

[24] Money Smart, ‘Types of Super funds.’ (2020) < https://moneysmart.gov.au/how-super-works/types-of-super-funds >

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