DIPLOMA IN LAW
LEGAL PROFESSION
ADMISSION BOARD
LAW EXTENSION COMMITTEE
LAW EXTENSION COMMITTEE SUBJECT GUIDE
10 LAW OF ASSOCIATIONS
WINTER SESSION 2016
This Guide includes the Law Extension Committee’s course information and teaching program and the
Legal Profession Admission Board’s syllabus. The syllabus is contained under the heading
“Prescribed Topics and Course Outline” and has been prepared in accordance with Rule 27H(a) of the
NSW Admission Board Rules 2015.
Course Description and Objectives
Lecturers
Assessment
September 2016 Examination
Lecture Program
Weekend Schools 1 and 2
Texts and Materials
Prescribed Topics and Course Outline
Compulsory Assignment
Assignment Question
Sample Examination Question
1
1
1-2
2
3-4
4-6
6-7
8-16
17
17
17-18
1
LAW EXTENSION COMMITTEE
WINTER 2016
10 LAW OF ASSOCIATIONS
COURSE DESCRIPTION AND OBJECTIVES
Law of Associations is a description of some of the laws which regulate associations of individuals.
People often choose to group together in a regimented structure in order to conduct their activities.
The rationale behind the choice of the particular type of grouping will vary depending upon the needs
at the time. Taxation advantages, the desire to limit liability, and the need to generate capital
externally are just some of the reasons behind this choice.
This course aims to introduce students to various types of associations which are the end result of the
choice being made. In particular, an introduction will be given to associations formed for profit-making
purposes as well as those not formed for profit. To this end, coverage is given to unincorporated and
incorporated non-profit associations, partnerships and companies.
The course involves a critical analysis of decided cases and appropriate State and Federal legislation.
It also includes extensive reference to current developments in both corporate practice and academic
journals. Knowledge of the problems associated with the current law is expected as is an appreciation
of attempts to remedy shortcomings.
LECTURERS
Mr M Zammit, BEc (Hons) (Newc), BA LLB (Macq)
Mr Zammit is a barrister-at-law. He holds degrees of Bachelor of Economics with Honours, Bachelor of
Arts and Bachelor of Laws. He can be contacted at Blackstone Chambers, DX 1280 Sydney,
telephone (02) 9220 9800, by facsimile (02) 9233 4209 or by email: zammit@blackstone.com.au.
Mr John-Paul Redmond, BA, LLB, LLM (Syd)
Mr Redmond is a barrister-at-law. He holds degrees of Bachelor of Arts, Bachelor of Laws and Master
of Laws from the University of Sydney.
ASSESSMENT
To be eligible to sit for the Board’s examinations, all students must complete the LEC teaching and
learning program, the first step of which is to ensure that you have registered online with the LEC in
each subject for which you have enrolled with the Board. This gives you access to the full range of
learning resources offered by the LEC.
To register with the LEC, go to www.sydney.edu.au/lec and click on the WEBCAMPUS link and follow
the instructions. Detailed guides to the Webcampus are contained in the material distributed by the
LEC, in the Course Information Handbook, and on the Webcampus.
Eligibility to Sit for Examinations
In accordance with the Legal Profession Admission Rules, the LEC must be satisfied with a student’s
performance in a subject in order for the student to be eligible to sit for the examination, conducted by
the Legal Profession Admission Board (LPAB). Assignments are used to assess eligibility.
Students are expected to achieve at least a pass mark of 50% in assignments to be eligible to sit for
examinations. However, a category of “deemed eligible” has been introduced to offer students whose
2
assignment mark is between 40-49% an opportunity to sit for the examination. In these circumstances
students are often advised not to sit. A mark below 40% means a student is not eligible to sit for the
examination.
Assignments as part of the Board’s Examinations
Assignment results contribute 20% to the final mark in each subject.
The Law Extension Committee (LEC) administers the setting and marking of assignments. The LEC
engages the LPAB’s Examiners to assess or supervise the assessment of assignments.
Submission
Assignments must be received by 11:59pm on the due date unless an extension has been granted.
Extensions must be requested by email prior to the due date. Specific supporting evidence must be
provided. Assignments that are submitted more than ten days late will not be accepted. Late
assignments attract a penalty of one mark out of 20, or 5% of the total marks available, per day.
Assessment
Assignments are assessed according to the “Assignment Grading and Assessment Criteria” outlined
in the Guide to the Presentation and Submission of Assignments. Prior to the examination,
assignments will be returned to students and results posted on students’ individual results pages of
the LEC Webcampus. Students are responsible for checking their results screen and ascertaining their
eligibility to sit for the examination.
Review
Where a student’s overall mark after the examination is between 40-49%, the student’s assignment in
that subject will be included in the Revising Examiner’s review. The final examination mark is
determined in accordance with this review. Assignment marks will not otherwise be reviewed.
SEPTEMBER 2016 EXAMINATION
Each candidate will be expected to have a detailed knowledge of the prescribed topics that are set out
in the Law Extension Committee’s course outline.
Candidates will be expected to have made a study of the prescribed materials in relation to those
topics, and to have analysed the cases contained in the course outline.
All enquiries in relation to examinations should be directed to the Legal Profession Admission Board.
3
LECTURE PROGRAM
Lectures will be held on Thursdays from 6.00pm to 9.00pm. In the first half of the semester, they will
be held in Carslaw Lecture Theatre 375 (CLT 375). Lecture venues for the second half of the
semester have yet to be confirmed. For details as to the location of venues, please refer to page 52 of
the Course Information Handbook for a map of the University of Sydney main campus.
Please note that this program is a general guide. It may be varied according to need, including
adjustments for longer or shorter semesters. Readings are suggested to introduce you to the material
to be covered in the lecture, to enhance your understanding of the topic, and to encourage further
reading. You should not rely on them alone.
WEEK
DATE
TOPIC
READINGS
1
12 May

Welcome and introduction to the subject

Unincorporated Non-Profit Associations
Corporations and
Associations Law
Chapter 4

Unincorporated Non-Profit Associations (cont.)

Incorporated Non-Profit Associations
2
19 May
Corporations and
Associations Law
Chapter 5 [NSW
Legislation Only]
Corporations and
Associations Law
Chapter 3
3
26 May

The Law of Partnership
4
2 Jun

The Law of Partnership (cont)
Corporations and
Associations Law
Chapter 3
5
9 Jun

Company Law: A Company as Corporate Entity
 Effect of registration of a company
 Equating a company to an individual
 The company as a separate legal entity
 Mitigating the rigour of the separate legal entity
doctrine
Corporations and
Associations Law
Chapter 10 and
Chapter 21 at
[21.365]-[21.476]
6
16 Jun

Company Law: A Company as Corporate Entity
(continued)
 Mitigating the rigour of the separate legal entity
doctrine (continued)
Corporations and
Associations Law
Chapter 10 and
Chapter 21 at
[21.365]-[21.476]
Study Break: Saturday 18 June – Sunday 3 July 2016
7
7 Jul

Company Law: The Law of Corporate
Governance
 Corporate governance rules
 The board of directors and the general meeting
Corporations and
Associations Law
Chapter 14 and
Chapter 24
8
14 Jul

Company Law: The Law of Corporate
Governance (continued)
 Acting properly with care
 Conflicts of interest and special cases
Corporations and
Associations Law
Chapter 21 at
[21.185]-[21.364]
and [21.477][21.516]
4
WEEK
DATE
TOPIC
READINGS
9
21 Jul

Company Law: The Law of Corporate
Governance (continued)
 Acting properly with care (cont.)
 Conflicts of interest and special cases (cont.)
10
28 Jul

Company Law: The Law
Governance (continued)
 Members Remedies
of
Corporate
Corporations and
Associations Law
Chapter 21 at
[21.185]-[21.364]
and [21.477][21.516]
Corporations and
Associations Law
Chapter 25
11
4 Aug

Company Law: The Law
Governance (continued)
 Members Remedies (cont.)
of
Corporate
12
11 Aug

Company Law: Corporate Liability
 Corporate capacity
 Authority to act for a company
 Indoor Management Rule
 Fraud and forgery
Corporations and
Associations Law
Chapter 25
Corporations and
Associations Law
Chapter 16
“Corporations and Associations Law” = J Gooley, M Zammit, M Dicker & D Russell, Corporations and
Associations Law: Principles and Issues, 6th ed. LexisNexis, 2015
WEEKEND SCHOOLS 1 AND 2
There are two weekend schools primarily for external students. Lecture students may attend on the
understanding that weekend school classes aim to cover the same material as provided in the weekly
lectures and are primarily for the assistance of external students.
Please note that it may not be possible to cover the entire course at the weekend schools. These
programs are a general guide, and may be varied according to need. Readings are suggested to
introduce you to the material to be covered in the lecture, to enhance your understanding of the topic,
and to encourage further reading. You should not rely on them alone.
Weekend School 1
TIME
MAJOR TOPICS
KEY READING
Saturday 28 May 2016: 8.00am – noon in New Law School Lecture Theatre 026 (New
LSLT 026)
8.00am-9.20am
9.30am-10.40am

Welcome and introduction to the
subject

Unincorporated Non-Profit
Associations
Unincorporated Non-Profit
Associations (continued)


10.45am-11.45am

Incorporated Non-Profit
Associations
The Law of Partnership
Corporations and Associations
Law Chapter 4
Corporations and Associations
Law Chapter 4 and Chapter 5
[NSW Legislation Only]
Corporations and Associations
Law Chapter 3
5
Sunday 29 May 2016: 4.00pm – 8.00pm in New Law School Lecture Theatre 026
(New LSLT 026)
4.10pm-5.20pm

The Law of Partnership
(continued)
Corporations and Associations
Law Chapter 3
5.30pm-6.35pm

Company Law: A Company as
Corporate Entity
 Effect of registration of a
company
 Equating a company to an
individual
 The company as a separate legal
entity
 Mitigating the rigour of the
separate legal entity doctrine
Corporations and Associations
Law Chapter 10 and Chapter
21 at [21.365]-[21.476]
6.45pm-8.00pm

Company Law: A Company as
Corporate Entity (continued)
 Mitigating the rigour of the
separate legal entity doctrine
(continued)
Corporations and Associations
Law Chapter 10 and Chapter
21 at [21.365]-[21.476]
Weekend School 2
TIME
MAJOR TOPICS
KEY READING
Saturday 23 July 2016: 8.00am – noon in New Law School Lecture Theatre 026 (New
LSLT 026)
8.00am-9.20am

Company Law: The Law of
Corporate Governance
 Acting properly with care
 Conflicts of interest and special
cases
Corporations and Associations
Law Chapter 21 at [21.185][21.364] and [21.477]-[21.516]
9.30am-10.40am

Company Law: The Law of
Corporate Governance (continued)
 Acting properly with care
(continued)
 Conflicts of interest and special
cases (continued)
Corporations and Associations
Law Chapter 21 at [21.185][21.364 and [21.477]-[21.516]
10.45am-11.45am

Company Law: The Law of
Corporate Governance (continued)
 Members Remedies
Corporations and Associations
Law Chapter 25
6
Sunday 24 July 2016: 4.00pm – 8.00pm in New Law School Lecture Theatre 026 (New
LSLT 026)
4.10pm-5.20pm

Company Law: The Law of
Corporate Governance (continued)
 Members Remedies (continued)
Corporations and Associations
Law Chapter 25
5.30pm-6.35pm

Company Law: Corporate Liability
 Corporate capacity
 Authority to act for a company
 Indoor Management Rule
 Fraud and forgery
Corporations and Associations
Law Chapter 16
6.45pm-8.00pm

Company Law: Corporate Liability
(continued)
 Corporate capacity (cont.)
 Authority to act for a company
(cont.)
 Indoor Management Rule (cont.)
 Fraud and forgery (cont.)
Corporations and Associations
Law Chapter 16
“Corporations and Associations Law” = J Gooley, M Zammit, M Dicker & D Russell, Corporations and
Associations Law: Principles and Issues, 6th ed. LexisNexis, 2015
TEXTS AND MATERIALS
For the period from 21 April to 30 May 2016, LexisNexis is offering our students a special discount and free
shipping on purchases made through the LexisNexis e-store at www.store.lexisnexis.com.au. Students quoting
the promo code LECW2016 will receive a 15% discount on all text titles (except for those authored by John
Carter). This discount is not limited to the prescribed or recommended texts for our courses. Students should,
however, still compare LexisNexis’s discounted price with that of other outlets. The Co-op Bookshop, for example,
offers a discount on texts sold to its members.
Course Materials
 Guide to the Presentation and Submission of Assignments (available on the LEC Webcampus).
Prescribed Materials




J Gooley, M Zammit, M Dicker & D Russell, Corporations and Associations: Principles and Issues,
6th ed. LexisNexis, 2015;
Corporations Legislation, 2016, Thomson Reuters or alternatively, Australian Corporations
Legislation, LexisNexis, 2016 (the practitioner edition now includes annotations) or alternatively,
Australian Corporations and Securities Legislation 2016, CCH;
Partnership Act 1892 (NSW) as amended;
Associations Incorporation Act 2009 (NSW).
Research Materials (NOT REQUIRED TO BE PURCHASED)
For the most recent developments in the law, and for further detail, reference and research purposes,
students should consult the following resources depending upon the topic:
Textbooks



Fletcher KL, The Law Relating to Non-Profit Associations in Australia and New Zealand, Thomson
Reuters, 1986;
Fletcher KL, The Law of Partnership in Australia, Thomson Reuters, 9th ed. 2007;
Graw S, An Outline of the Law of Partnership, Thomson Reuters, 4th ed. 2011;
7



Redmond P, Companies and Securities Law: Commentary and Materials, Thomson Reuters, 5th
ed. 2009.
Redmond P, Corporations and Financial Markets Law, Thomson Reuters, 6th ed. 2013
Austin RP & Ramsey IM, Ford’s Principles of Corporations Law, 16th ed. LexisNexis, 2015
Legislation Commentary


Australian Corporations Law, Principles and Practice, vol 1-3, LexisNexis, Australia;
Australian Corporations and Securities Law Reporter, vol 1-3, CCH, Australia.
Case Reports



Australian Corporations and Securities Reports, (1989-2011), LexisNexis;
Australian Company Law Reports, (vol 1-15), LexisNexis;
Australian Company Law Cases (1971-2011), CCH, Australia.
Journals
There are a number of specialised journals which contain useful research that is relevant to this
subject. Included are:



Companies and Securities Law Journal, Thomson Reuters;
Australian Journal of Corporate Law, LexisNexis;
Australian Business Law Review, Thomson Reuters.
Internet
Once you have registered online with the LEC, you will have full access to the LEC Webcampus,
including access to links to relevant cases, legislation and other useful websites in the Course
Materials section. Other useful websites include:




Australian Legal Information Institute: http://www.austlii.edu.au
Law and Justice Foundation of New South Wales: http://www.lawfoundation.net.au
Australian Securities and Investments Commission: http://www.asic.gov.au
New South Wales Department of Commerce Office of Fair Trading:
http://www.fairtrading.nsw.gov.au/default.html
8
PRESCRIBED TOPICS AND COURSE OUTLINE
The topics covered in this subject are as follows:
1.
Unincorporated non-profit associations.
2.
Incorporated non-profit associations.
3.
The Law of Partnership.
4.
Company Law – a company as a corporate entity
5.
Company Law – The Law of Corporate Governance
6.
Company Law – The Law of Corporate Liability
TOPIC 1 - UNINCORPORATED NON-PROFIT ASSOCIATIONS
(1)
Nature of unincorporated non-profit associations
Emphasis will be placed on the following: the lack of recognition as a legal entity; the lack of
contractual capacity; the liability of committee members.
Kibby v Santiniketan Park Association Inc [1998] VSC 148 at paragraphs [41-50]
Wise v Perpetual Trustee Co Ltd [1903] AC 139
Re James Alexander Bacon, Steve Black and Kevin Reynolds [1989] FCA at paragraph 22 and
following
Bacon v Pianta (1966) 114 CLR 634
(2)
Court’s intervention in internal management
Lee v The Showman’s Guild of Great Britain [1952] 2 QB 329
Australian Football League v Carlton Football Club Ltd (1998) 2 VR 546.
Mitchell v Royal New South Wales Canine Council Ltd [2001] NSWCA 162 at paragraphs [28-32]
Plenty v Seventh Day Adventist Church of Port Pirie [2003] SASC 68 at paragraphs [31-46]
Redhead Grange Incorporated v Davidson [2002] NSWSC 90 at paragraphs [5-11]
Cameron v Hogan (1934) 51 CLR 358
Nagle v Fielden [1966] 1 All ER 689
Tutty v Buckley (1971) 125 CLR 353
(3)
Contracts and unincorporated non-profit associations
Freeman v McManus [1958] VR 15
Carlton Cricket and Social Club v Joseph [1970] VR 487
Bradley Egg Farm v Clifford [1943] 2 All ER 378
Peckham v Moore [1975] 1 NSWLR 353
(4)
Liability in tort
Smith v Yarnold [1969] 2 NSWR 410
Hrybynyuk v Mazur [2004] NSWCA 374
9
TOPIC 2 - INCORPORATED NON-PROFIT ASSOCIATIONS
(1) Overview and stated objects of Associations Incorporation Act 2009 (NSW)
Associations Incorporation Act 2009, ss 3 – 5
(2) Registration of incorporated non-profit associations
Associations Incorporation Act 2009, ss 6 – 9, 15 – 18
(3) Features of incorporated non-profit associations
Associations Incorporation Act 2009, ss 19 – 27 and Schedule 1
(4) Management of incorporated non-profit associations
Associations Incorporation Act 2009, ss 28 - 41
(5) External administration - particular emphasis on offences relating to incurring of debts or
fraudulent conduct
Associations Incorporation Act 2009, ss 67 – 71
(6) Relevance of Corporations Legislation
Associations Incorporation Act 2009, ss 95 – 97
TOPIC 3 – THE LAW OF PARTNERSHIP
(1)
Definition
Partnership Act, s 1, and note also Corporations Act 2001, s 115
Beckingham v The Port Jackson and Manly Steamship Co (1957) 57 SR (NSW) 403
United Dominions Corporation v Brian (1985) 157 CLR 1
(2)
Determining when a partnership exists
(a)
Elements of a partnership
Partnership Act, s 1
(aa) The carrying on of a business
Canny Gabriel Castle Advertising v Volume Sales (Finances) Pty Ltd (1974) 131 CLR
321
(ab) By persons in common
Lang v James Morrison and Co Ltd (1911) 13 CLR 1
(ac) With a view to a profit
(b)
The Partnership Act provides a number of rules to assist in determining the existence of a
partnership: s 2
Keith Spicer Ltd v Mansell [1970] 1 WLR 333
Cribb v Korn (1911) 12 CLR 205
Note that the parties' stated intention may be overruled.
Ex parte Delhasse. In Re Megavand (1877-1878) 7 Ch D 511
10
Stekel v Ellice [1973] 1 WLR 191
(3)
Relationship of partners to outsiders
(a)
In contract
Partnership Act, s 9. Also note s 5 which requires an analysis of the following elements:
-
Partners' actions are within the type of business carried on by the firm
Polkinghorne v Holland (1934) 51 CLR 143
-
Partners' actions must be carried out in the usual way
Mercantile Credit v Garrod [1962] All ER 1103
Goldberg v Jenkins [1889] 15 VLR 36
-
Knowledge of third parties is relevant
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541
Also note Partnership Act, ss 6 – 9, and the meaning and application of actual authority and
ostensible authority.
(b)
In tort
Partnership Act, ss 10-13
National Commercial Banking Corporation Ltd v Batty (1986) 60 ALJR 379
Polkinghorne v Holland (1934) 51 CLR 143
(c)
Incoming and outgoing partners' liability
Partnership Act, ss 17, 18
(d)
Estoppel
Partnership Act, s 14
(4)
Relationship of partners to each other
Note generally Partnership Act, ss 19 – 31
United Dominions Corporation v Brian (1985) 157 CLR 1
Chan v Zacharia (1984) 154 CLR 178
Canberra Residential Developments Pty Ltd (2009) 69 ACSR 435 at 449-458
(5)
Incorporated partnerships
TOPIC 4 COMPANY LAW – A COMPANY AS A CORPORATE ENTITY
(1)
Effect of registration of a company

A company’s capacity of suing and being sued

A company’s perpetual succession – s 119

A company as an owner of property

A company as a victim of theft or fraud
11
(2)
Equating a company to an individual
(3)
The company as a separate legal entity
Salomon v Salomon and Co Ltd [1897] AC 22
Lee v Lee's Air Farming [1961] AC 12
Macaura v Northern Assurance Company Ltd [1925] AC 619
(4)
Mitigating the rigour of the separate legal entity doctrine
(a)
Common law
(i)
Fraudulent use of the corporate form or to avoid an existing legal obligation
Gilford Motors Co Ltd v Horne [1933] Ch D 935
Re Darby [1911] 1 KB 95
Electric Light and Power Supply Corporation Ltd v Cormack (1911) 11 SR (NSW) 350
Jones v Lipman [1962] 1 WLR 832
(ii)
Agency
Re FG (Films) Ltd [1953] 1 WLR 483
Smith, Stone & Knight Ltd v Birmingham Corp [1939] 4 All ER 116
Hotel Terrigal Pty Ltd v Latec Investments Ltd (No 2) [1969] 1 NSWR 676
Premier Building and Consulting Pty Ltd (recs appd) v Spotless Group Ltd (2008)
ACSR 114 at 187-190
(iii) Groups of companies
DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR
852
Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549
Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1985) 5 NSWLR 254
(b)
Corporations Law (“insolvent trading”)
(i)
Sections 592-593, 95A, 588G-588Z
ASIC v Plymin, Elliot & Harrison (2003) 21 ACLC 700 at pages 776-786
Metal Manufactures Ltd v Lewis (1988) 6 ACLC 725
Commonwealth Bank v Friedrich (1991) 9 ACLC 946
Statewide Tobacco Services Ltd v Morley (1990) 8 ACLC 827 and (1992) 10 ACLC
1233
Group Four Industries Pty Ltd v Brosnan (1992) 10 ACLC 1437
Standard Chartered Bank of Australia Ltd v Antico (1995) 13 ACLC 1381
Metropolitan Fire Systems Pty Ltd v Miller (1997) 23 ACSR 699
Hall v Poolman (2007) 65 ACSR 123
McLellan, Re The Stake Man Pty Ltd v Carroll [2009] FCA 1415
Edwards v ASIC [2009] NSWCA 424 at [80]-[88]
12
TOPIC 5 COMPANY LAW – THE LAW OF CORPORATE GOVERNANCE
A.
Corporate Governance Rules
(1)
Sources of corporate governance rules
(2)

Replacable rules and adopted constitutions – s 141

Memorandum of Association and Articles of Association
Legal operation of a company’s corporate governance rules

Corporate governance rules as a statutory contract – s 140

Corporate governance rules not enforceable by outsiders
Eley v Positive Government Security Life Assurance Co Ltd (1875) 1 Ex D 20; affirmed (1876)
1 Ex D 88

Corporate governance rules bind members, officers and company

Applicants for membership
Bailey v NSW Medical Defence Union Ltd (1995) 132 ALR 1

Member is bound or entitled only as a member
Hickman v Kent or Romney Marsh Sheep-breeders Association [1915] 1 Ch D 881
Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd (2008) 66 ACSR 1 at paragraphs 21-30

The terms of the statutory contract
(3) Altering the constitution
(4) Effects of altering the constitution
(5) Membership
B.
The Board of Directors and the General Meeting
(1)
General concepts
(2)
Structure of board of directors
(3)
The board’s operations
(4)
Members’ meetings
(5)
Statutory validation of irregularities – s 1322
(6)
Doctrine of unanimous assent
Parker & Cooper Ltd v Reading [1926] Ch 975
Re Duomatic Ltd [1969] 2 Ch 365
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279
13
C.
Acting properly with care
(1)
Nature of duties
Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 3) (2009) 69
ACSR 264 at paragraphs 52 – 53 and 70
(2) The function of directors’ duties – Canberra Residential Developments Pty Ltd v Brendas (No 5)
[2009] FCA 34 at [62] – [114]
(3)
Who is subject to the fiduciary and statutory duties

Directors – s 9 including de facto and shadow directors

Officers

Senior managers
(4) Statutory duties to act in good faith in the best interests of the company and for a proper purpose
– s 181
(5) Duty to act in good faith in the interests of the company
Mills v Mills (1938) 60 CLR 150
Ngurli v McCann (1953) 90 CLR 425
Harlowe's Nominees v Woodside (Lakes Entrance) Oil Company NL (1968) 121 CLR 483
ASIC v Warrenmang Ltd (2007) 63 ACSR 623
The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239 at [4426]

Meaning of “interests of the company”

Interests of existing and future members

Interests of creditors

Interests of employees

The interests of the company in a group of companies
(6) Duty to act for proper purposes
Permanent Building Society (in liq) v Wheeler (1994) 14 ACSR 109
Howard Smith v Ampol Ltd [1974] AC 821
Whitehouse v Carlton Hotels Pty Ltd (1987) 162 CLR 285
Advance Bank Australia v FAI Insurances Australia [1987] 9 NSWLR 464
Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478
ASIC v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305
Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260
Bell IXL Investments Ltd v Life Therapeutics Ltd (2008) 68 ACSR 154
(7) Duty not to fetter discretions
(8) Statutory and general law duties of care

Section 180
AWA v Daniels (t/as Deloitte Haskins & Sells) (1992) 7 ACSR 759; 10 ACLC 933 and Daniels
(formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 16 ACSR 607; 13 ACLC
614
Chew v R (1992) 10 ACLC 816
R v Byrnes (1995) 13 ACLC 1488 and (1997) 15 ACLC 408
14
ASIC v Vines (2003) 48 ACSR 322; (2004) 22 ACLC 37
Vines v ASIC (2007) 62 ACSR 1; 25 ACLC 448; [2007] NSWCA 75
ASIC v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305
Forge v ASIC (2004) 213 ALR 574
Re HIH Insurance Ltd (in prov. liq); ASIC v Adler (2002) 41 ACSR 72
ASIC v Rich (2010) 75 ACSR 1; [2009] NSWSC 1229
ASIC v Maxwell (2006) 59 ACSR 373; 24 ACLC 1308
ASIC v Sydney Investment House Equities Pty Ltd (2009) 69 ACSR 1 at paragraphs 23-51
ASIC v Healy [2011] FCA 717
ASIC v MacDonald (2009) 71 ACSR 368
ASIC v Hellicar and Ors [2012] HCA 17

the statutory business judgment rule – s 180(2) and Re HIH Insurance Ltd (in prov. liq); ASIC
v Adler (2002) 41 ACSR 72 at [453]; ASIC v Rich (2010) 75 ACSR 1 at [7242] and [7248] –
[7295]; [2009] NSWSC 1229

sources of general law duties

the standards to be applied

care, skill and diligence – Daniels t/as Deloitte Haskins & Sells v AWA Ltd (1995) 37 NSWLR
438 and Commonwealth Bank v Friedrich (1991) 5 ACSR 115

delegation of duties – s 198D and ASIC v Adler [2002] NSWSC 171 at [451]
(9) Civil and criminal consequences of breach of duty
(10) Ratification and relaxation of duties by members – s 239
(11) Exoneration by the court
D.
Conflicts of interest and special cases
(1)
The fiduciary rules
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
Furs Ltd v Tomkies (1936) 54 CLR 583
Phipps v Boardman [1967] 2 AC 46
Green and Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
Queensland Mines Ltd v Hudson (1978) 52 ALJR 399 (Privy Council)
(2)
Who is subject to fiduciary responsibilities
(3)
To whom are the duties owed

To the company

To individual members – Percival v Wright [1902] 2 Ch 421 and Glavanics v Brunninghausen
(1996) 19 ACSR 204
(4)
The conflict rule
(5)
Statutory provisions regarding interested directors – ss 191 and 195
(6)
The profit rule and corporate opportunities
(7)
Statutory provisions: improper use of office or information – ss 182 and 183
Chew v R (1992) 173 CLR 626; 7 ACSR 481
R v Byrnes; R v Hopwood (1995) 17 ACSR 551
ASIC v Adler (2001) 41 ACSR 72
15
Doyle v ASIC (2005) 56 ACSR 159
Lawfund Australia Pty Ltd v Lawfund Leasing Pty Ltd (2008) 66 ACSR 1
(8) Civil remedies for breach of fiduciary duty - ss 1317E, F, H, J, K, M, N and P – note time limits
see Newtronics Pty Ltd v Gjergja (2007) 63 ACSR 611; Also note liability of third parties – Barnes
v Addy (1874) 9 Ch App 244 at 251-252; The Bell Group Ltd (in liq) v Westpac Banking
Corporation (No 9) [2008] WASC 239; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230
CLR 89; Canberra Residential Developments Pty Ltd v Brendas (No 5) [2009] FCA 34 at [115] –
[122]
(9) Curing breaches of duty by company consent - Relief from consequences of breach
Corporations Act 2001, ss 1317S and 1318
ASIC v Plymin, Elliot & Harrison (No 2) (2003) 21 ACLC 1237
E.
Members’ Remedies
(1)
Procedure to obtain relief
(a)
Personal and representative actions
(b)
Derivative actions
(2) Personal actions
(a)
Corporations Act 2001, Part 2F.1 (Oppressive, unfair, or discriminatory conduct or conduct
not in the best interests of the company – ss 232-235 and 461(f) and (g))
Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324
Wayde v New South Wales Rugby League (1985) 59 ALJR 798
Re Bagot Well Pastoral Company Pty Ltd (1993) 11 ACLC 1
Re George Raymond Pty Ltd: Salter v Gilbertson (2000) 18 ACLR 85
Fexuto Pty Ltd v Bosnjax Holdings Pty Ltd (2001) 19 ACLC 856
Turnbull v NRMA (2004) 22 ACLC 1094 (at paragraphs 23-39)
McWilliam v LJR McWilliam Estates Pty Limited (1990) 20 NSWLR 703
Kizquari Pty Limited v Prestoo Pty Limited (1993) 10 ACSR 606
Re DG Brims and Sons Pty Limited (1995) 16 ACSR 559
JD Hannes & Ors v MJH Pty Limited (1992) 7 ACSR 8
Dalkeith Investments Pty Limited (1984) 9 ACLR 247
Hogg v Dymock & Ors (1993) 11 ACSR 14
John J Starr (Real Estate) Pty Limited v Robert R Andrew & Ors (1991) 6 ACSR 63
Crawley v Short (2010) 76 ACSR 286
Nassar v Innovative Precasters Group Limited (2009) ACSR 343
Campbell v Backoffice Investments Pty Limited (2009) CLR 304
(b)
Corporations Act 2001, Part 2F.2 (class actions)
(c)
Corporations Act 2001, Part 2F.3 (inspection of books)
(d)
Injunctions
BHP Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609
(e)
Winding up by members
Corporations Law, ss 460, 461, 464
Re Tivoli Freeholds Ltd [1972] VR 445
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
Re Yenidje Tobacco Co [1916] 2 Ch 426
Loch v John Blackwood [1924] AC 783
16
(3) Derivative actions
Corporations Act 2001, (Part 2F.1A)
Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313
Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534
Fiduciary Ltd v Morningstar Research Ltd [2004] NSWSC 664
South Johnstone Mill Ltd v Dennis (2008) 64 ACSR 447
Cassegrain v Gerard Cassegrain & Co Pty Ltd (2008) 68 ACSR 132
Ballard v Mulitplex Ltd (2008) 68 ACSR 208
Joinery Products Pty Ltd v Imlach (2008) 67 ACSR 520
Chanwan v Euphoric Pty Ltd (2008) 65 ACSR 661
Power v Ekstein [2010] NSWSC 137 at [31] – [130]
TOPIC 6 COMPANY LAW – THE LAW OF CORPORATE LIABILITY
(1)
Corporate capacity
(2)
Authority to act for a company
(a)
The power to bind a company to a contract
(i)
Agency
-
Actual authority
-
Apparent or ostensible authority
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Co Ltd [1964] 2 QB
480
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising Co Pty Ltd (1976) 50
ALJR 203
(ii)
Acting as the company
Tesco Supermarkets Ltd v Natrass [1972] AC 153
(b)
The indoor management rule and the Corporations Act, ss 126, 127, 128-130
Royal British Bank v Turquand (1855) 5 El and Bl 248
Northside Developments Pty Ltd v Registrar-General (1990) 64 ALJR 427
Bank of New Zealand v Fiberi Pty Ltd (1994) 12 ACLC 48
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253
Story v Advance Bank Australia Ltd (1993) 11 ACLC 629
Soyfer v Earlmaze [2000] NSWSC 1068
Forrest v Cosmetic Co Pty Ltd [2008] SASC 152
Sunburst Properties Pty Ltd (in liq) v Agwater Pty Ltd [2005] SASC 335
Errichetti Holdings Pty Ltd v Western Plaza Hotel Corp Pty Ltd (2006) 201 FLR 192
(c)
Fraud and forgery
Corporations Act 2001, s 128(3)
17
COMPULSORY ASSIGNMENT
In Law of Associations, there is only ONE ASSIGNMENT. This assignment is compulsory and
must be submitted by all students. Students must submit the assignment by the due date. A
pass mark is 50%. Refer to the Guide to the Presentation and Submission of Assignments for
the assignment grading and assessment criteria. Students who fail to satisfy the compulsory
requirement will be notified through the Results screen on the Webcampus before the
examination period of their ineligibility to sit the examination in this subject. The maximum
word limit for the assignment is 2000 words (inclusive of all footnotes but not bibliography).
The rules regarding the presentation of assignments and instructions on how to submit an assignment
are set out in the LEC Guide to the Presentation and Submission of Assignments which can be
accessed on the LEC Webcampus. Please read this guide carefully before completing and submitting
an assignment.
The completed assignment should be lodged through the LEC Webcampus, arriving by 11:59pm on
the following date:
Compulsory Assignment
Tuesday 19 July 2016
(Week 9)
ASSIGNMENT QUESTION
To obtain a copy of the Law of Associations assignment for the Winter Session 2016, please
follow the instructions below:
1. Register online with the LEC (see page 26 of the Course Information Handbook for detailed
instructions). Once you have registered, you will have full access to all the facilities on the
LEC Webcampus.
2. Then go into the Webcampus, select the Course Materials section and click on the link to the
assignment questions for this subject.
SAMPLE EXAMINATION QUESTION
Motor Parts and Fittings Pty Limited (Company) was incorporated in 1985. The Company conducted
a business of manufacturing and supplying motor parts and fittings (Business). Upon incorporation of
the Company, Mr and Mrs Johnstone were appointed as Governing Directors and were each issued
with 1 “A” class share in the Company.
Under the constitution of the Company, Mr and Mrs Johnstone, as Governing Directors, had
unfettered discretion to conduct the affairs of the Company as they saw fit, including to issue further
shares in the Company. In addition, as holders of “A” class shares in the Company, they had certain
rights under the constitution of the Company which included a right to share in profits and dividends
and a right to share in the proceeds of sale of any assets of the Company.
After incorporation of the Company, Mr and Mrs Johnstone issued 1 “B” class share each to their
daughters, Felicity and Joanne. Under the constitution of the Company, the “B” class shares had no
rights attached to them. That is, the “B” class shares had no voting rights, no right to share in profits or
dividends and no right to share in the proceeds of sale of any assets of the Company. At the time of
being issued with the “B” class shares, Mr and Mrs Johnstone asked Felicity and Joanne and their
husbands if they wished to participate in the Business. Felicity and her husband agreed but Joanne
and her husband did not want to participate.
18
The Business was conducted on a large industrial property which was purchased by the Company for
$450,000 (Property). The funds to purchase the Property were lent to the Company by Mr and Mrs
Johnstone.
Mr and Mrs Johnstone, Felicity and her husband took an active part in the Business and the Company
and each drew a modest wage from the Business. All profits made by the Business was reinvested in
the Business. The Business continued to grow from the direct efforts of Mr and Mrs Johnstone and in
particular from the direct efforts of Felicity and her husband.
In 1995, Felicity and her husband approached Mr and Mrs Johnstone, complaining that they had
invested all their energy into the Business and the Company but had no direct benefit other than their
modest wage. The “B” class share in the Company held by Felicity had no rights attached. In particular
they had no right to share in the assets of the Company. There was no incentive for them to continue
to work in the Company. Felicity and her husband stated that, unless they were given an equal share
in the Company, they would resign.
Mr and Mrs Johnstone could not continue to run the Business and the Company without Felicity and
her husband and, if the Company was to continue, Felicity and her husband needed to be given an
equal share in the Company. Accordingly in 1995 Mr and Mrs Johnstone held a meeting as Governing
Directors of the Company and resolved to issue two further “A” class shares in the Company to Felicity
and her husband. The existing “B” class share held by Felicity was cancelled.
No notice of the meeting of Governing Directors or of the proposed resolution to issue 2 “A” class
shares to Felicity and her husband was given to Joanne.
Under the constitution of the Company, holders of “B” class shares were not entitled to notice of
Governing Directors meetings or proposed resolutions because holders of “B” class shares had no
voting rights.
After the issue of the further 2 “A” class shares to Felicity and her husband, the Business continued to
grow. In 2015 the Company entered into an agreement for the sale of the Business and the Property
for $18 million. On the basis of the shareholding in the Company, Mr and Mrs Johnstone and Felicity
and her husband, as equal “A” class shareholders, would be entitled to an equal share of the $18
million. Joanne, as holder of only a “B” class share, had no rights to share in the $18 million.
Joanne has discovered the sale of the Business and the Property and has now discovered that her
sister Felicity and brother in law were issued with 2 “A” class shares in 1995 without notice to her. She
alleges that the actions of Mr and Mrs Johnstone and Felicity and her husband amounted to
oppression of Joanne under section 232 the Corporations Act.
Advise Mr and Mrs Johnstone and Felicity and her husband as to whether they have breached
section 232 of the Corporations Act. Give reasons by reference to appropriate case law.