Objectives

Answer the following questions with reference to the relevant statute law and general common law principles operating in Australia concerning the consequences of the company being a separate legal entity and the application of the internal rules of a company.

Assessment Task

Question 1

Bob Beech is a scallop fisherman and involved in commercial scallop fishing in the coastal water of Jervis Bay in New South Wales. The stock of scallops in this water is limited and subject to protective legislation to ensure regeneration. Hence, the Scallop Fishing and Marketing Act provides for a quota system. Under the quota system, a person must apply for a quota which will permit him or her to catch 50 tonnes of scallops in a calendar year. Further, the Scallop Marketing Authority will purchase any scallops up to the quota limit for each person.

The Act also provides for a number of offences. It provides that it is an offence to sell scallops caught in New South Wales waters to any person other than the Scallop Marketing Authority and it further provides that it is an offence to catch more than the quota limit.

Each offence carries a fine of up to $100,000.

Bob has the physical capacity to catch more than 50 tonnes of scallops in a year and wishes to make more money from his business. His daughter Alice tells him that by incorporating a company he could double his catch.
Is she correct?

Question 2

New Nirvana Ltd is a company controlled by the members of the hard rock band, N/N. A number of wholly owned subsidiaries of New Nirvana Ltd are involved in setting up and running the band's concerts. One of the subsidiary companies, Nuclear Blast Sounds Pty Ltd, is responsible for setting up the sound equipment at N/N concerts in Australia. At a recent N/N concert in Sydney, Nuclear Blast Sounds Pty Ltd negligently set the sound levels too

high with the result that five audience members suffered permanent hearing loss. Unfortunately for those audience members, Nuclear Blast Sounds Pty Ltd had no negligence insurance and cannot pay the likely damages claims.

Advise the injured audience members whether they can make New Nirvana Ltd liable for Nuclear Blast Sounds Pty Ltd's negligence.

Question 3

Simon, Michael and Don set up a project management company called Millennium Pty Ltd. Don is a solicitor and the constitution of Millennium Pty Ltd nominates that Don will be the solicitor for any land purchases or sales made by the company. The articles also provide that any disputes which arise between the company and its members should be first referred to an arbitrator before there are any court proceedings.
After a number of years, Simon and Michael meet another solicitor who they think is more efficient than Don and they appoint him as solicitor for Millennium Pty Ltd.

Don brings legal action against Millennium Pty Ltd over the matter. Advise the company as to their legal position.