ACL Cases complete solution
Alternative Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) - Pg. 59
Business [DIFFERENCE BETWEEN A JOINT VENTURE AND A PARTNERSHIP]
Structures • The courts are not bound by the labels the parties place on their business relationship.
• Regardless of the joint venture label provided by the parties. The court held that it was a partnership on the
basis that profits were being shared equally between the parties.
Chan v Zacharia (1984) - Pg. 125 [DURATION OF THE FIDUCIARY DUTY]
• Partners of a partnership owe each other fiduciary duties.
• These duties will continue even after dissolution, until the partnership’s debts have been paid and assets
divided between the partners.
• Chan had breached his fiduciary duty by failing to act with perfect fairness and good faith (seek an advantage
for himself) and was therefore accountable for private profits.
Incorporation and Huddart Parker v Moorehead (1909) - Pg. 7 [SEARCH FOR UNIFORM CORPORATE LAWS]
Its Consequences • The Constitution does not confer complete corporate law powers on the federal government to regulate all
(Part 1) aspects of corporate law.
• The incorporation and regulation of companies were left to the states.
New South Wales v Commonwealth (1990) - Pg. 8 [SEARCH FOR UNIFORM CORPORATE LAWS]
• The High Court reaffirmed its earlier decision in the Huddart Parker case and held that the statutory provisions
dealing with the incorporation of companies were constitutionally invalid.
Salomon v Salomon & Co Ltd (1897) - Pg. 153 [COMPANY AS A SEPARATE LEGAL ENTITY]
• A company is a separate legal entity (from its founder, shareholders and directors) with the rights and powers of
a real person. Therefore, this includes the right to borrow money and be sued for its repayment by a creditor.
Macaura v Northern Assurance Co Ltd (1925) - Pg. 157 [DISTINCTION BETWEEN PRIVATE AND COMPANY ASSETS]
• A shareholder has no legal or equitable interest in the assets of a company.
• Assets purchased by the company or otherwise held in the company’s name belong to the company. They are
not owned by the directors, shareholders or other participants in the company. Even a shareholder who owns
100% of the shares and is the sole director does not own the assets of the company.
• A company is a separate legal entity and can own property in its own right, Section 124.
• A company holds its property separately from the property of its members.
Lee v Lee’s Air Farming Ltd (1961) - Pg. 158 [COMPANY CONTRACTING WITH ITS MEMBERS – AS EMPLOYEE AND
DIRECTOR]
,ACL Cases complete solution
• A person may have multiple roles in a company and the company remains a separate legal entity without
affecting the legal stages.
• As a separate legal entity, a company can enter into contractual relations with its members (as employee and
director).
• The fact that the member is a controlling shareholder or a director does not prohibit them from contracting
with the company.
Gilford Motor Co Ltd v Horne (1933) - Pg. 164 [AVOIDANCE OF LEGAL OBLIGATION]
• It had a non-compete clause (gardening leave). If you leave the business you cannot compete against it for a
period of time.
• Court can pierce the corporate veil by saying the company is just you so we can target you.
• The incorporator deliberately use the company to avoid contractual obligations undertaken by them. In such
circumstances, the courts have held the company to be a mask used to conceal identity and have been
prepared to ignore the corporate veil to enforce legal and contractual obligations.
Re Darby; ex parte Brougham (1911) - Pg. 167 [FRAUD]
• The courts are prepared to ignore the corporate veil if a company is used as a vehicle to conduct fraud.
• The court ignored the corporate veil to see who was in charge and control by looking into the company. The
formed company was a ‘dummy’ company used to conduct fraudulent activities. As a result, the undisclosed
secret profits made were surrendered to the liquidator.
Walker v Wimborne (1976) - Pg. 169 [CORPORATE GROUPS AND THE VEIL]
• Assets of the corporate group (a number of companies which are associated by common, allied to unified
control or capacity to control) cannot be pooled to pay for the debts incurred by each company within the
group. The debts incurred by each company belonged to that company, not to the corporate group collectively.
Industrial Equity Ltd v Blackburn (1977) - Pg. 170 [CORPORATE GROUPS AND THE VEIL]
• In the absence of a contract creating some additional right, the creditors of company A, a subsidiary within a
group, can only look to that company for payment of their debts. They cannot look to company B, the holding
company, for payment.
• Through reliance on Salomon and Walker v Wimborne, holding that each company in the group remained a
separate legal entity.
• The parent company sought to treat the profits earned by one of its subsidiaries as its own profits prior to them
being passed to the holding company by way of dividend. The subsidiary company argued against this. The
, ACL Cases complete solution
court sided with the subsidiary company.
Smith Stone & Knight Ltd v Birmingham Corp (1939) - Pg. 171 [VEIL-PIERCING ON AGENCY GROUNDS]
• Ignore the commercial reality of a subsidiary.
• The local council acquired the land, owned by the parent, on which the subsidiary company conducted
business. For technical reasons, the subsidiary company could not sue for compensation, instead the parent
did. The council argued that they are separate legal entities and the parent was not entitled.
• An agency relationship existed between the parent company and the subsidiary on the basis of answering the
following six questions
o 1. Were the profits treated as the profits of the parent?
o 2. Were the persons conducting the business appointed by the parent?
o 3. Was the parent the head and the brain of the trading venture?
o 4. Did the parent govern the adventure, decide what should be done and what capital should be
embarked on the venture?
o 5. Did the parent make the profits by its skill and direction?
o 6. Was the parent in effectual and constant control?
Briggs v James Hardie & Co Pty Ltd (1989) - Pg. 172 [VEIL-PIERCING ON AGENCY GROUNDS]
• Control, even overwhelming control, of a company is not sufficient to create an implied agency between the
company and the controller.
• The corporate veil may be pierced where one company exercises complete dominance and control over another
is entirely too simplistic.
• The law pays scant regard to the commercial reality that every holding company has the potential and, more
often than not, in fact, does exercise complete control over a subsidiary.
ACN 007528207 Pty Ltd (in liq) v Bird Cameron (Reg) (2005) - Pg. 173 [VEIL-PIERCING ON AGENCY GROUNDS]
• An example of how Australian courts have dealt with applications to lift the corporate veil on the basis of an
implied agency.
• Reaffirms the importance of the beneficial ownership of profits for identifying an agency relationship between
members of a corporate group.
Commissioner of Taxation v BHP Billiton Finance Ltd (2010) - Pg. 175 [PROBLEMS POSED BY CORPORATE GROUPS]
• Highlights the confusion that corporate groups continue to generate, more than 110 years after the House of
Alternative Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) - Pg. 59
Business [DIFFERENCE BETWEEN A JOINT VENTURE AND A PARTNERSHIP]
Structures • The courts are not bound by the labels the parties place on their business relationship.
• Regardless of the joint venture label provided by the parties. The court held that it was a partnership on the
basis that profits were being shared equally between the parties.
Chan v Zacharia (1984) - Pg. 125 [DURATION OF THE FIDUCIARY DUTY]
• Partners of a partnership owe each other fiduciary duties.
• These duties will continue even after dissolution, until the partnership’s debts have been paid and assets
divided between the partners.
• Chan had breached his fiduciary duty by failing to act with perfect fairness and good faith (seek an advantage
for himself) and was therefore accountable for private profits.
Incorporation and Huddart Parker v Moorehead (1909) - Pg. 7 [SEARCH FOR UNIFORM CORPORATE LAWS]
Its Consequences • The Constitution does not confer complete corporate law powers on the federal government to regulate all
(Part 1) aspects of corporate law.
• The incorporation and regulation of companies were left to the states.
New South Wales v Commonwealth (1990) - Pg. 8 [SEARCH FOR UNIFORM CORPORATE LAWS]
• The High Court reaffirmed its earlier decision in the Huddart Parker case and held that the statutory provisions
dealing with the incorporation of companies were constitutionally invalid.
Salomon v Salomon & Co Ltd (1897) - Pg. 153 [COMPANY AS A SEPARATE LEGAL ENTITY]
• A company is a separate legal entity (from its founder, shareholders and directors) with the rights and powers of
a real person. Therefore, this includes the right to borrow money and be sued for its repayment by a creditor.
Macaura v Northern Assurance Co Ltd (1925) - Pg. 157 [DISTINCTION BETWEEN PRIVATE AND COMPANY ASSETS]
• A shareholder has no legal or equitable interest in the assets of a company.
• Assets purchased by the company or otherwise held in the company’s name belong to the company. They are
not owned by the directors, shareholders or other participants in the company. Even a shareholder who owns
100% of the shares and is the sole director does not own the assets of the company.
• A company is a separate legal entity and can own property in its own right, Section 124.
• A company holds its property separately from the property of its members.
Lee v Lee’s Air Farming Ltd (1961) - Pg. 158 [COMPANY CONTRACTING WITH ITS MEMBERS – AS EMPLOYEE AND
DIRECTOR]
,ACL Cases complete solution
• A person may have multiple roles in a company and the company remains a separate legal entity without
affecting the legal stages.
• As a separate legal entity, a company can enter into contractual relations with its members (as employee and
director).
• The fact that the member is a controlling shareholder or a director does not prohibit them from contracting
with the company.
Gilford Motor Co Ltd v Horne (1933) - Pg. 164 [AVOIDANCE OF LEGAL OBLIGATION]
• It had a non-compete clause (gardening leave). If you leave the business you cannot compete against it for a
period of time.
• Court can pierce the corporate veil by saying the company is just you so we can target you.
• The incorporator deliberately use the company to avoid contractual obligations undertaken by them. In such
circumstances, the courts have held the company to be a mask used to conceal identity and have been
prepared to ignore the corporate veil to enforce legal and contractual obligations.
Re Darby; ex parte Brougham (1911) - Pg. 167 [FRAUD]
• The courts are prepared to ignore the corporate veil if a company is used as a vehicle to conduct fraud.
• The court ignored the corporate veil to see who was in charge and control by looking into the company. The
formed company was a ‘dummy’ company used to conduct fraudulent activities. As a result, the undisclosed
secret profits made were surrendered to the liquidator.
Walker v Wimborne (1976) - Pg. 169 [CORPORATE GROUPS AND THE VEIL]
• Assets of the corporate group (a number of companies which are associated by common, allied to unified
control or capacity to control) cannot be pooled to pay for the debts incurred by each company within the
group. The debts incurred by each company belonged to that company, not to the corporate group collectively.
Industrial Equity Ltd v Blackburn (1977) - Pg. 170 [CORPORATE GROUPS AND THE VEIL]
• In the absence of a contract creating some additional right, the creditors of company A, a subsidiary within a
group, can only look to that company for payment of their debts. They cannot look to company B, the holding
company, for payment.
• Through reliance on Salomon and Walker v Wimborne, holding that each company in the group remained a
separate legal entity.
• The parent company sought to treat the profits earned by one of its subsidiaries as its own profits prior to them
being passed to the holding company by way of dividend. The subsidiary company argued against this. The
, ACL Cases complete solution
court sided with the subsidiary company.
Smith Stone & Knight Ltd v Birmingham Corp (1939) - Pg. 171 [VEIL-PIERCING ON AGENCY GROUNDS]
• Ignore the commercial reality of a subsidiary.
• The local council acquired the land, owned by the parent, on which the subsidiary company conducted
business. For technical reasons, the subsidiary company could not sue for compensation, instead the parent
did. The council argued that they are separate legal entities and the parent was not entitled.
• An agency relationship existed between the parent company and the subsidiary on the basis of answering the
following six questions
o 1. Were the profits treated as the profits of the parent?
o 2. Were the persons conducting the business appointed by the parent?
o 3. Was the parent the head and the brain of the trading venture?
o 4. Did the parent govern the adventure, decide what should be done and what capital should be
embarked on the venture?
o 5. Did the parent make the profits by its skill and direction?
o 6. Was the parent in effectual and constant control?
Briggs v James Hardie & Co Pty Ltd (1989) - Pg. 172 [VEIL-PIERCING ON AGENCY GROUNDS]
• Control, even overwhelming control, of a company is not sufficient to create an implied agency between the
company and the controller.
• The corporate veil may be pierced where one company exercises complete dominance and control over another
is entirely too simplistic.
• The law pays scant regard to the commercial reality that every holding company has the potential and, more
often than not, in fact, does exercise complete control over a subsidiary.
ACN 007528207 Pty Ltd (in liq) v Bird Cameron (Reg) (2005) - Pg. 173 [VEIL-PIERCING ON AGENCY GROUNDS]
• An example of how Australian courts have dealt with applications to lift the corporate veil on the basis of an
implied agency.
• Reaffirms the importance of the beneficial ownership of profits for identifying an agency relationship between
members of a corporate group.
Commissioner of Taxation v BHP Billiton Finance Ltd (2010) - Pg. 175 [PROBLEMS POSED BY CORPORATE GROUPS]
• Highlights the confusion that corporate groups continue to generate, more than 110 years after the House of
