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SESSION 1 2008
FINAL EXAMINATION
Time Allowed: 3 hours Total Number of Questions: 4 Answer all FOUR QUESTIONS Each question is worth 15 marks
QUESTION 1
(15 Marks)
In ABC Developmental Learning Centres Pty Ltd v Wallace [2006] VSC 171, Justice Bell held: there is no one answer to the question whether the criminal actions of employees (or directors or contractors) of a company can be counted as the actions of the company. Do you agree? Discuss the various ways in which corporate criminal liability can be established. Your answer must refer to relevant precedents and also include discussion on the significance of the ABC case (above) for principles of company law. QUESTION 2 (15 Marks)
ANSWER ANY 3 PARTS OF THIS QUESTION (3 X 5 MARKS) (a) The decision of the High Court of Australia in Sons of Gwalia has raised questions about the appropriate treatment of claims that shareholders may have as aggrieved investors against a company in voluntary administration or liquidation. [Corporations and Markets Advisory Committee Discussion Paper, Shareholder Claims Against Insolvent Companies, 2007] Discuss the High Courts decision in Sons of Gwalia Ltd v Margaretic (2007) 60 ACSR 292; [2007] HCA 1 and outline its implications for corporate stakeholders (investors, creditors and insolvency practitioners). (b)The courts have long recognised that the corporate form can be abused and the tendency of many business people to perform a kind of dance of the corporate veil and to duck and dive behind the corporate veil. [Harris, Hargovan and Adams, Australian Corporate Law, 2008, LexisNexis]. In what circumstances will the courts ignore the corporate veil? Illustrate your answer with reference to relevant court decisions. (c) The floating charge was invented by lawyers in the nineteenth century to enable manufacturing and trading companies to raise loan capital via debentures and offer security. Discuss the nature and practical utility of floating charges and the need for the creditor to ensure that the debtor company has registered the charge. (d) The joint venture is something other than a partnership. The activity of a joint venture is joint but little else is intended to be joint. Discuss at least 5 characteristics that differentiate a joint venture from a partnership.
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With reference to the Corporations Act, relevant precedents and the facts above, advise: (a) Green and Mrs Blue, as directors of Indigo Pty Ltd, of their chances of success in avoiding personal liability under the particular defence they seek to rely on as identified above. (10 Marks) and (b) Discuss the relevance of the case Australian Securities and Investments Commission v Vizard [2005] FCA 1037 for company law. Your answer should also comment on the significance of the decision in Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 to the Vizard case. (5 Marks) ../please see over for Question 4
QUESTION 4
(15 Marks)
Ben, Mary and Liang are the company directors in QuickCo Pty Ltd (QuickCo), having founded the company several years ago. Lately, QuickCo has been experiencing unusual cash flow problems and may not be able to pay all of it's creditors their full entitlements. This is the first time in the company's history that the business' cash flow has not been sufficient to cover all liabilities. The directors of QuickCo believe that the company's position will improve as they are currently negotiating several large contracts that would hopefully bring in sufficient cash flow to satisfy all present liabilities. Ben, Mary and Liang are concerned about their future job prospects if the company becomes insolvent. CreditCo Pty Ltd (CreditCo) is a secured creditor of QuickCo with a 1st registered mortgage over QuickCo's office building (its most significant asset). CreditCo is concerned because QuickCo has not made its monthly loan repayments over the last 2 months. CreditCo is concerned about obtaining repayment of the debt, but does not want to pressure QuickCo as the company is its largest business customer. If QuickCo goes out of business, CreditCo will loose a substantial portion of its business. CreditCo is flexible about obtaining repayment of its debt. Ezifinance Pty Ltd (Ezifinance) is an unsecured creditor of QuickCo who also has not been paid for the last 2 months and is concerned about the repayment of its debt by QuickCo. QuickCo is Ezifinance's smallest client and the CEO of Ezifinance would like to clear the debt off the company's books sooner rather than later. Advise each of the following parties with reasons, and with reference to the relevant sections of the Corporations Act, as to which form of external administration would best suit their needs. (a) (b) (c) Ben, Mary and Liang CreditCo; and Ezifinance (5 marks) (5 marks) (5 marks)
Your answer should also consider whether the party you are advising is able to initiate the form of external administration you are advocating.
End of Paper