BUSN2101 week 2

Corporate Capacity Capacity as natural person-able to do some additional thingsConstitution may impose limitations on powers. Companies now typically don't have limitations. Will be the case sometimes with non-profit cases (want to drop Ltd) can get permission upon demonstration that your objectives are for charity.What are the consequences for acting beyond power? this won't have effect on third party. Even if company has entered into contract beyond power, it won't mean contract is invalid but there may be sanctions within company

Limited 

Limited Liability Principle of limited liability works within groups of the company. Only way company can borrow money is if director personally gives guarantee supported by mortgage in order for bank to be willing to lend money. Impact on benefit of limited liability on director of company. There are economic benefits for limited liabilities (reducing monitoring and promoting transfer of shares) people who lose out if company liquidates are unsecured creditors and victims of negligence.

What is the corporate veil? In salomon, court was not prepared to look behind the existence of the company but there are some occasions when courts will have to look behind the company's existence to see who's running it and potentially make them liable rather than artifical legal entity (pierce corporate veil)Salomon v Salomon is commonly applied to whether the court should look behind the company's existencePrinciple of separate legal personality applies to companies in a group (e.g. normally, will look to subsidiary and not to parent in relation to claims if subsidiary is one in interest) Briggs v James Hardie & Co Pty Ltd (1989)- Court said it wasn't possible to say what evidence was sufficient to make out a case against the parent company.Gilford Motor Co v Horne, court looked behind corporate veil. Corporate form was being used to avoid existing legal duty, so court prepared to look behind the company in those circumstances. Employee was subject to restraint of trad clause (not allowed to compete with company). He set up a competitive company that wasn't under his name but the court lifted the veil and said him and the company were the same personJones v Lipman someone sold property to someone else and vendor changed his mind (didn't want to sell) with sale of property court orders specific performance. vendor transferred property to a company he controlled in order to avoid legal duties under contractSmith, Stone & Knight v Birmingham. company acting as agent or partner of the controller which was a case where the subsidiary had no money/assets/anything!Daimlet Co v Continental type and rubber co. Trading with the Enemy Act adopted a de facto control test (look to see who owners are), Germans were in controlLegislation places liability on people other than company (e.g. directors liable for debts if company enters into contracts if insolvent libaility of directors s588G. In similar circumstances (allows subsidiary to trade while insolvent) holding company will be liable

Companies' liability for civil wrongs Vicarious liability-employer liable. Direct liability- attributing fault directly to company, who has the 'direct mind and will' of the company. If they are at fault then the company is at fault e.g. if directors negligent, company liablePrimary or direct liabilityLennard's Carrying Co v Asiatic Petroleum. Had the damage of the ship been caused without the fault of the owner? The fault was person managing ship on behalf of company (company argued therefore company not at fault, just individual) court said unless ocmpany is never going to be liable, you have to equate someone in the company with the company itselfHow can companies commit crimes? Because of current legislation we can take action against companies for deaths (crimes like that) Same thing goes, vicarious liability or direct liability question.

Criminal liability- HL Bolton (engineerying) Co Ltd v TJ Graham & Sons. Directing and and will of the company needs to be determined to make company liableTesco Supermarkets v Nattrass - Problem was junior employee showed initiative by re-stocking shelves and the stock had full price rather than sale price. the company had policies in place so company was successful in making defence -> vicarious liabilityABC Developmental Learning Centres Pty Ltd v Wallace- where toddler escaped. Childcare centre was slightly understaffed s26 of childern's services act requires propriety of centre to ensure measures taken to protect child s27 requires children to be adequately supervised. ABC claimed it wasn't their fault, it was the employees. The issue then was whether the actions of the lower level employees could be attributed to ABC. Callway JA said we need to look at the policy objective in the statute-here it is to protect children. They said ABC is liable in order to fulfil the purpose of the legislation.Any legislation passed by the Commonwealth, there are some provisions applied when trying to work out faults12->applies to companies in the same way as individuals s3 (or maybe 13)->criminal offence has physical elements and fault elements (in order for murder to be murder there needs to be fault -> intention, reckless not accidental)Physical element attributed to company if it is committed by an employee, officer or agent acting within the actual or apparent scope of their employment or within the actual or apparent authority. How do we find fault element in company? Commonwealth legislation helps a bit, we look at directing mind or will (board of directors or high managerial agent knowingly, recklessly carried out conduct or expressly authorised it BUT doesn't apply if company exercised due diligence. Corporate culture, directing or leading to non-compliance or failure to maintain a corporate culture of compliance. these principles will only apply in relation to application of Commonwealth Law

New Page