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Objectives

Answer the given problems with reference to the relevant common law and equity principles operating in Australia concerning contracts plus related and other transactions. Do not consider the effects of legislation potentially applicable other than that specifically identified. Students may make whatever additional factual and/or legal assumptions are necessary or convenient. And students should prepare about 3500-4000 words, or about 400 words per 10 mark allocation.

Assessment Task:

problem 1:

Read the recent tribunal case Taylor v Archicentre Ltd (General) [2012] NSWCTTT 348 (http://www.austlii.edu.au/au/cases/nsw/NSWCTTT/2012/348.html), and together with any other material you may care to consider, answer the following problems.

a) Provide a summary account of the key material facts concerning the architectural services contract, its delivery and ‘completion’.

b) Was the applicant’s claim out of time?

c) As a hypothetical variation on the actual facts, assume instead that due to unhappy relations between the respondent and its subcontractor Ms Seymour, only (a) and (c) services had been provided. The respondent by letter dated 24 February 2009, then advised the applicant that since despite its best endeavors, it wasn’t able to provide the remaining (b),(d)-(g) services, it was terminating the remainder of the contract forthwith. But that Taylor wasn’t eligible for a refund as the contract had been under costed in the first instance - which Taylor ought to have been aware of. Assume further that: (i) Taylor – having little choice - accepted the respondent’s termination and promptly found a well-respected architectural firm, to provide the remaining (b),(d-(g) services at a cost of $2,336 and (ii) the original (a)-(g) service contract was perfectly divisible in seven equal $233.57 cost components.

Required:

Advise the applicant, whether, in these circumstances, he can recover $1,167.85 on a quantum meruit from the respondent plus the $2,336 cost of substitute (b),(d)-(g) services?

problem 2:

In mid-January 2011, during severe weather conditions caused by Cyclone Yasi, the Nikkin Kapala, a 60,000 tonne coal carrier, ran aground near Bryon Bay, northern New South Wales.  Its owners, Lismore Shipping Ltd (“Lismore”), entered into a $3 million success fee plus costs contract with a salvage firm, Hawkins Salvage Pty Ltd (“Hawkins”) for its recovery in accordance with a very detailed schedule of operations.  Their contract contained Clause 30 as follows: ‘If a dispute arises out of this agreement, the parties promise that they will try in good faith to resolve the dispute by direct mediation. But if they fail to settle such dispute via mediation, then the dispute shall forthwith be arbitrated upon under the Commercial Arbitration Act, 2010 (NSW) (“CAA 2010”) as amended.’

When salvage operations were well underway, the parties had a major dispute over the schedule of operations and high costs that Hawkins was incurring.  As a result, Hawkins threatened to stop operations and terminate the contract altogether, refusing Lismore’s requests they refer the dispute to the Manly Mediation Centre, as nominated in the contract. Assume that if Hawkins did stop recovery operations, the Nikkin Kapala would likely suffer serious damage to its hull and superstructure.

Required:

a) What advantages, compared with the court system, does alternate dispute resolution have?

b) If Hawkins failed to comply with Clause 30, what enforcement remedies (if at all) might Lismore Shipping have?

c) Advise Lismore Shipping as to what (worst scenario) liability Hawkins would have for damages, if it carries out its threatened strike and as a result, the Nikkin Kapala sustains $6 million in structural damage also causing water pollution from leaking oil attracting a $1 million government fine. As a further consequence, Lismore loses $3 million in shipping income whilst the Nikkin Kapala when eventually salvaged, is repaired; Lismore also spends $2 million to charter another bulk carrier to carry out its shipping contracts until the Nikkin Kapalais repaired and re-certified as seaworthy.

problem 3:

A well-established central Queensland firm of chartered accountants, Arunta, Bardo & Derain (“Arunta”) as part of its community engagement, managed the financial affairs of the seaside  Possum Park Progress Association (“Possum”) on an ex gratia basis, i.e. for no charge. Possum owned a commercial building – “Seaview” - valued at $2 million from which it derived $250,000 per annum in rental income. It also had cash reserves of $3 million. In 2011, in managing Possum’s affairs, Arunta:

A) Failed to renew the comprehensive insurance policy for Seaview. Shortly afterwards, it was damaged by vandals who smashed all its windows causing $100,000 in damage. Possum had to refund its tenants $10,000 in rental fees for the period the building was being repaired. Whilst undergoing repairs, the building wasn’t accessible – due to a council prohibition order – and tenants also lost $60,000 in gross income.

B) Invested $750,000 of Possum’s funds as short term, two year debt bonds issued by Townsville-based investment companyPrimeStorm Ltd. Nine months later PrimeStorm went into voluntary liquidation and Possum lost its entire $750,000 debt bond investment. PrimeStorm had previously had its credit rating downgraded and been dropped from leading investment guides which firms like Arunta subscribed to. Arunta had received a $15,000 ‘incentive placement fee’ from PrimeStorm for investing Possum’s funds with it, but failed to disclose this to Possum.

Required:

a) Advise Arunta of its liability (if any) to Possum under the Australian common law in relation to torts as amended by the Civil Liability Act 2003 (Qld).

b) Discuss avenues for limiting or entirely excluding liability for Arunta’s potential tort liability, under common law, in relation its voluntary unpaid work such as for Possum. Can it be addressed by a suitably drafted exclusion clause?

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