LAW & ETHICS (ROI)
2nd Year Examination
August 2014
Exam Paper, Solutions & Examiner’s Comments
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NOTES TO USERS ABOUT THESE SOLUTIONS
The solutions in this document are published by Accounting Technicians Ireland. They are intended to provide
guidance to students and their teachers regarding possible answers to questions in our examinations.
Although they are published by us, we do not necessarily endorse these solutions or agree with the views
expressed by their authors.
There are often many possible approaches to the solution of questions in professional examinations. It should
not be assumed that the approach adopted in these solutions is the ideal or the one preferred by us. Alternative
answers will be marked on their own merits.
This publication is intended to serve as an educational aid. For this reason, the published solutions will often be
significantly longer than would be expected of a candidate in an examination. This will be particularly the case
where discursive answers are involved.
This publication is copyright 2014 and may not be reproduced without permission of Accounting Technicians
Ireland.
© Accounting Technicians Ireland, 2014.
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A2014 Law & Ethics (LER)
Accounting Technicians Ireland
1st Year Examination: Autumn Paper 2014
Paper: LAW & ETHICS (ROI)
Wednesday 20th August 2014 - 9.30 a.m. to 12.30 p.m.
INSTRUCTIONS TO CANDIDATES
For candidates answering in accordance with the law and practice of the Republic of Ireland.
Section A is a compulsory question and must be attempted.
Section B answer ANY FOUR of the SIX questions.
Section C answer ANY FOUR of the SIX questions.
If more than the required questions are answered in Section B and Section C, then only the correct
number of questions, in the order filed, will be corrected.
Candidates should allocate their time carefully.
Cite any relevant authorities and/or statutory provisions to support your answers. Marks will be awarded
for specific reference to sections of the Acts/Orders and decided cases. Answers should be illustrated
with examples, where appropriate.
Question 1 begins on Page 2 overleaf.
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SECTION A
Compulsory Question
Cite any relevant authorities and/or statutory provisions to support your answers
QUESTION 1 – CORPORATE GOVERNANCE
Aubrey and Miller Telecommunications Ltd has recently been the subject of a takeover by a UK multinational
company Cranford Global Communications Plc. As this company is listed on the UK stock market, the
directors of Aubrey and Miller Telecommunications Ltd have been informed that they will need to comply with
the Combined Code on Corporate Governance. Although the directors have heard this term, they are unsure as
to what it means from a practical perspective. To date Aubrey and Miller Telecommunications Ltd has been run
quite informally by its two directors/owners. They have never had a formal Annual General Meeting and they
have been the sole directors of the company since its incorporation. Since the takeover, Cranford Global
Communications Plc has informed them that the company will now be required to elect non-executive directors
to its Board. They have contacted you seeking advice in this regard.
(a)
Define the meaning of the term corporate governance.
(2 marks)
(b) From the perspective of corporate governance explain the distinction between the role of an Executive
Director and a Non-Executive Director.
(6 marks)
(c) Explain the main principles of the Combined Code on Corporate Governance under the following
headings:
(i) Effectiveness
(7 marks)
(ii) Accountability
(3 marks)
(iii) Relations with Shareholders
(2 marks)
Total 20 Marks
P.T.O.→
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SECTION B
Answer ANY FOUR of the SIX questions in this Section
Cite any relevant authorities and/or statutory provisions to support your answers
QUESTION 2 – COMPANIES AND FORMATION DOCUMENTS
Mineral Explorations Ireland was established as a statutory company over twenty years ago. A decision has
recently been taken by the Board of Directors of the company to convert the business into a public limited
company and offer shares to the public. Because of this alteration of business form, the Board has agreed to
alter the Articles of Association of the company to remove the right of voluntary pre-emption upon the sale of
shares. Their solicitor has also advised them that they will require a Trading Certificate following their
conversion to a public limited company.
(a) Explain the meaning of the term Statutory Company and give one example of a statutory company
operating in Ireland.
(2 marks)
(b) Outline the procedure that must be followed to effect a lawful alteration of the Articles of Association, and
the prerequisites to effect this change.
(4 marks)
(c) List the FOUR pieces of information that must be provided to the Companies Registration Office in order
for that company to receive a Trading Certificate.
(4 marks)
Total 10 Marks
QUESTION 3 – DEBENTURES
(a) Define a debenture and outline any THREE pieces of information normally included in a debenture
document.
(5 marks)
(b) Explain the difference between a single debenture, a series of debentures and debenture stocks.
(5 marks)
Total 10 Marks
QUESTION 4 – DIRECTORS STATUTORY DUTIES AND REMOVAL
Fisher is a director in Atlas Catering Ltd. Last month this company entered into a contract with Best Beef
Butchers, whereby Best Beef Butchers would become the exclusive supplier of meat to Atlas Catering Ltd for
the next year. There was a lot of discussion about this contract by the Board of Directors of Atlas Catering Ltd
as they had a cheaper offer for this contract from an alternative supplier, but Fisher put forward a strong
argument to award the contract to Best Beef Butchers based upon their reputation and ability to meet future
orders. Since this meeting, the Managing Director of Atlas Catering Ltd has discovered that Fisher’s father-inlaw owns Best Beef Butchers and that Fisher’s wife is the sales director of this company. Atlas Catering Ltd is
now considering removing Fisher as director for breach of his statutory duties.
(a) Examine the statutory duty imposed upon a company director where they have an interest in a company
contract, commenting also on the consequences of non-compliance.
Note:
A discussion of fiduciary duties is NOT required.
(5 marks)
(b) Explain the procedure required to effect the lawful removal of a company director, and the rights of a
director in this regard.
(5 marks)
Total 10 Marks
P.T.O.→
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QUESTION 5 – AUDITORS
The profits of Glamour Cosmetics Ltd have increased significantly in the past two years. As a consequence the
company’s solicitor has notified its Board of Directors that they will now need to appoint an auditor. Glamour
Cosmetics Ltd has never had an auditor and seeks your advice in this regard:
(a) Outline the consequences for Glamour Cosmetics Ltd if they fail to appoint an auditor, despite the fact that
the company is no longer eligible for an audit exemption.
(1 mark)
(b) List any THREE rights of a company auditor.
(3 marks)
(c) Explain any THREE duties of a company auditor.
(6 marks)
Total 10 Marks
QUESTION 6 – RECEIVERSHIP AND LIQUIDATION
Willow Engineering Ltd is in financial difficulty. They owe the Trustee Bank of Galway €800,000 – this loan is
secured by a charge over the company’s stock, and they have not made any payments on foot of this loan in the
last five months. The Trustee Bank of Galway is considering its options and has contacted you for advice.
(a) Explain the main difference between putting a company into receivership as opposed to putting a company
into liquidation.
(3 marks)
(b) Assuming that the Trustee Bank of Galway decides to make an application to have Willow Engineering Ltd
put into compulsory liquidation, discuss the main grounds (excluding insolvency) upon which this order
may be granted, both under legislation and at the absolute discretion of the Court.
(7 marks)
Total 10 Marks
QUESTION 7 – MISCELLANEOUS
(a) List any THREE company matters that must dealt with as part of the ordinary business of an Annual
General Meeting (AGM).
(3 marks)
(b) List the priority of payment of company debt upon liquidation.
(3 marks)
(c) Outline any FOUR grounds upon which a company name may be refused registration, pursuant to the
provisions of the Registration of Business Names Act 1963.
(4 marks)
Total 10 Marks
P.T.O.→
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SECTION C
Answer ANY FOUR of the SIX questions in this Section
Cite any relevant authorities and/or statutory provisions to support your answers
QUESTION 8 – EUROPEAN LAW
(a) The primary sources of EU law are the Treaties. Explain the objectives of any THREE of the SIX EU
Treaties.
(7.5 marks)
(b) Outline the role of the European Parliament.
(2.5 marks)
Total 10 Marks
QUESTION 9 – CONTRACTUAL CONSIDERATION AND CAPACITY
(a) Mackenzie decided to book a family holiday to visit her sister in San Francisco. She visited numerous
airline websites looking for the best offer, and was amazed to discover an offer with Transatlantic Airlines
of return flights for four people for €560. The actual cost of the four flights was only €35 per person each
way, and the additional charges related to miscellaneous fees. One week after booking the flights
Mackenzie received an email from Transatlantic Airlines stating that there had been an error on the website
and that the actual cost of the flights per person each way was €350 not €35 as quoted. Transatlantic
Airlines are demanding an additional payment of €315 per person, or else threatening to cancel the contract.
Mackenzie has contacted you seeking advice in this regard.
Discuss the rule that consideration must be sufficient, but need not be adequate. In light of this discussion
assess whether or not Mackenzie is legally obliged to pay the additional €315 per person cost to
Transatlantic Airlines.
Note:
A discussion of the other elements of a valid contract is NOT required.
(6 marks)
(b) In the context of contractual capacity, the only contracts that are automatically binding upon a minor are
contracts for necessaries and beneficial contracts of service. Explain the meaning of contracts for
necessaries and beneficial contracts of service and give an example of each (2 x 2 marks).
(4 marks)
Total 10 Marks
QUESTION 10 – CONTRACTS OF AND FOR SERVICES
Luther has been employed as a delivery driver for Leyton Publications for the past six years. Luther’s contract
states that he is employed as an independent contractor. Under the terms of his contract Luther is paid a daily
fee of €50, plus a mileage allowance. At the end of every month Luther invoices Leyton Publications for
monies due, and receives this payment without any statutory deductions. Luther has a Leyton Publications
discount card, which gives him access to a subsidised staff canteen, and provides him with a 20% discount on
any Leyton Publications books purchased from their on-line bookstore. Luther uses his own vehicle to
complete deliveries and is solely responsible for its maintenance and upkeep. When Luther is busy or
unavailable he often gets his son, Reed, to help him with these deliveries. In this situation he is solely
responsible for paying Reed.
Last week Leyton Publications called Luther to a meeting and told him that they were terminating his contract,
due to declining sales. Luther queried his entitlements in this situation, but Leyton Publications informed him
that he did not have any rights on termination as he is a contractor and not an employee. Luther is confused as
to what this means and seeks your advice.
Question 10 is continued overleaf
P.T.O.→
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(a) Discuss any TWO tests used by the Courts to distinguish between a person employed under a contract of
service and a contract for service (3 marks x 2).
(6 marks)
(b) Based on this discussion assess whether Luther is likely to be classed as an employee or contractor,
providing reasons for your answer.
(2 marks)
(c) If Luther is classed as an employee, outline any TWO of his employment rights on the termination of his
contract.
(2 marks)
Total 10 Marks
QUESTION 11 – REMEDIES IN TORT
The two main remedies in a Tort action are injunctions and damages. In this regard explain the meaning:
(a) The meaning of the term “injunction” and the types of injunctions that may be granted by the Court.
(3 marks)
(b) The distinction between general damages and special damages.
(4 marks)
(c) The meaning of the term “punitive damages”, including an example of a situation where these types of
damages may be awarded.
(3 marks)
Total 10 Marks
QUESTION 12 – AGENCY
(a) Outline any FIVE methods by which a contract of agency can be terminated.
(5 marks)
(b) Dalton asked his neighbour Percy to look after his apartment while he went on honeymoon to the South
American rainforest. One week after Dalton went off on honeymoon there was a fire in the apartment
complex, and Dalton’s property incurred smoke and water damage as a consequence of this fire. Percy
attempted to call Dalton to let him know what happened, but he kept getting a voicemail message stating
that Dalton’s phone was out of coverage, and to call back later. Percy decided to rent a storage unit, and he
put Dalton’s furniture, clothing and other valuables into this unit – to prevent them incurring any further
damage. He also contacted a plumber to pump the water out of Dalton’s apartment.
Upon Dalton’s return Percy explained to him what had happened and presented him with a bill from the
plumber and for the storage unit. Dalton is unsure as to whether he is obliged to pay these bills and seeks
your advice.
Discuss the concept of agency by necessity and determine whether an agency of necessity has arisen
between Dalton and Percy and whether Dalton is obliged to pay these bills.
(5 marks)
Total 10 Marks
QUESTION 13 – MISCELLANEOUS
(a) Define the meaning of the term delegated legislation and outline any TWO examples of the forms it may
take.
(3 marks)
(b) Explain the nature of a unilateral offer, commenting on how it must be accepted, how it can be revoked,
and citing one relevant case example.
(4 marks)
(c) Outline the meaning of the term constructive dismissal, and state where the burden of proof lies when a
claim of constructive dismissal is raised.
(3 marks)
Total 10 Marks
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A2014 Law & Ethics (LER)
1st Year Examination: August 2014
Law and Ethics ROI
Suggested Solutions
and
Examiner’s Comments
Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct
and will be marked on their own merits.
Statistical Analysis – By Question
Question No.
Average Mark
(%)
Nos.
Attempting
1
36%
2
33%
3
68%
4
51%
5
69%
6
35%
7
69%
8
49%
9
40%
10
62%
11
38%
12
62%
13
51%
155
78
97
86
128
87
147
67
72
146
38%
62%
51%
Statistical Analysis - Overall
62%
Pass Rate
49%
Average Mark
Range of Marks
Nos. of Students
0-39
42
40-49
20
50-59
57
60-69
26
70 and over
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Total No. Sitting Exam
159
117
Total Absent
15
Total Approved Absent
291
Total No. Applied for Exam
General Comments:
The results achieved in this sitting of the exam paper were generally above par with the results from the Autumn
sitting in previous years (54% in 2013, 55% in 2012). This improvement is to be commended and is likely to
have arisen as a consequence of the inclusion of two new questions on the paper (Question 7 and 13). These
questions were popular and candidates responded well to them, and tended to score marks in the higher award
brackets.
In addition, some scripts were truly excellent and demonstrated a depth of knowledge and understanding of the
subject matter, which is to be applauded.
Those students who failed to attain a pass mark and who plan on re-sitting this examination are advised to
remember the following points when answering the exam questions:
1.
2.
3.
4.
5.
Read the question carefully and only answer the question being asked.
Avoid a discussion of irrelevant issues – this will not gain you additional marks.
Always define the legal concepts, and include explanatory case law, where appropriate. Even if your
application is not correct – you will still be awarded marks where you have explained the relevant concepts.
No marks will be awarded for citing legislation verbatim – where no attempt has been made to explain the
application/contextual meaning of the provision.
Students should attempt all required questions, and all components of questions.
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6.
Students should be cognisant of the importance of the compulsory question, which accounts for 20% of the
overall marks on the paper. The chapters from which the compulsory question is drawn are clearly
highlighted in the manual and should be given prominence when studying for exams. Performance in this
question is often a key factor in passing or failing this examination.
Examiner’s Comments on Question One
This question was not well answered and in a lot of cases was a decisive factor in candidates not attaining an
overall pass mark in this exam.
Part A:
Most students gave a reasonable definition of corporate governance. Better answered gave a more
detailed and robust response.
Part B:
The majority of candidates gave a good explanation of the distinction between an executive and non
executive director. Candidates lost marks for not dealing with the specifics of the question asked.
The question stated “from the perspective of corporate governance” and answers should have
reflected on the variations between these two classifications from that angle to attain full marks.
Part C:
This is the component that candidates found most challenging, and in some instances candidates
lost all available marks. Candidates tended to provide definitions of these corporate governance
terms from a literal perspective, rather than reflect on obligations imposed. For example, in C (ii)
key terminology such as transparent processes, risk management, internal controls and balanced
assessment were not mentioned and instead candidates literally translated the word accountability
and discussed either accounting obligations or accountability regarding company money.
Suggested Solution 1
A. Definition of Corporate Governance: This can be defined as: (1) the process of rules, laws and
institutions that operate together to maximise transparency and accountability within the company’s
structure, (2) it embodies the rules and procedures on corporate affairs and provides a structure to
enable the company to meet its aims and to have its performance monitored, (3) in reality, it embodies
the process by which companies are directed and controlled, and (4) it concerns the relationship
between directors and the stakeholders in the company (any 2 = 2 marks)
B. Executive and Non-Executive Directors: executive directors are those who manage the business on a
permanent basis and give continuous attention to the affairs of the business – more often than not they
are an employee and they usually hold important positions within the day to day running of the
business (2 marks) – whereas non-executive directors are appointed to manage the business on a
transient basis – they are more involved in strategic management at board level, and are not involved in
the day to day running – they are appointed due to their expert knowledge, experience, attainment or
skills (2 marks) – in terms of corporate governance their role is to monitor the executive directors
and ensure they are focused on attaining the objectives of the company, to bring an independent view
to board decision making and they may form a committee to determine the salary of executive directors
(2 marks)
C.(1)
Effectiveness: (1) The Board and its committees should have an appropriate balance of skills,
experience, independence and knowledge of the company to enable them to discharge their duties and
responsibilities, (2) there should be a formal, rigorous and transparent procedure for the appointment of
new directors to the Board, (3) all directors should be able to allocate sufficient time to the company to
discharge their responsibilities, (4) all directors should receive induction on joining the Board and
should regularly update and refresh their skills and knowledge, (5) the Board should be supplied in a
timely manner with quality information to discharge their responsibilities, (6) the Board should
undertake a formal and rigorous annual evaluation of its performance, that of its committees and
individual directors, and (7) all directors should be submitted for re-election at regular intervals, subject
to continued satisfactory performance (7 = 7 marks)
C.(2)
Accountability: (1) The Board should present a balanced and understandable assessment of the
company’s position and prospects, (2) the Board is responsible for determining the nature and extent of
any significant risks that it is willing to undertake in order to achieve its strategic objectives – therefore
they must have sound risk management and internal control systems, and (3) the Board must establish
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formal and transparent processes for considering how they should apply the corporate reporting, risk
management, and internal control principles to the running of the company and for maintaining an
appropriate relationship with the company’s auditors (3 = 3 marks)
C.(3)
Relations with Shareholders: (1) There should be a dialogue with shareholders based on the mutual
understanding of objectives – this is the responsibility of the Board, and (2) the Board should use the
AGM to communicate with investors and encourage their participation in the company (2 = 2 marks)
Examiner’s Comments on Question Two
Part C of this question proved particularly challenging to candidates.
Part A:
Although the majority of candidates knew the meaning of the term “statutory company”, some
confused it with private companies. A large portion of candidates stated that this company is created
by the government – this is not correct – it is created by an Act of Parliament – although I awarded
the marks nonetheless as the concept was correctly addressed. Most candidates gave a correct
example.
Part B:
The majority of candidates correctly explained the procedure for alteration of the Articles, but to
attain full marks candidates should have also discussed the prerequisites when effecting this
alteration. This omission resulted in a loss of marks.
Part C:
Candidates were confused as to the information included in the Trading Certificate, as opposed to the
Memorandum, Articles and Form A1. Candidates are advised that these are separate documents and
that the information required is different in each (although there is some overlap). This topic
requires a thorough review by lecturers when teaching this area of the syllabus.
Suggested Solution 2
A. Statutory Company: This is a company created by an Act of the Oireachtas (Parliament) and whose
function is connected to the State (1 mark) – examples of these companies include: the ODCE, IASSA,
Electric Ireland, the National Consumer Agency etc (1 mark)
B. Alteration of the Articles of Association: this alteration requires the consent of the members by the
passing of a special resolution at a general meeting, where the shareholders were provided with 21 days
notice of the meeting (Section 15 CA 63) – once passed the CRO must be notified and a copy of the
resolution must be forwarded to their office (2 marks) – Prerequisites: the alteration cannot override the
provisions of Companies Acts, the Memorandum of Association and the general rules of law – and all
alterations must be made bona fide and in the best interests of the company as a whole i.e. the shareholders
as a whole (2 marks)
C. Trading Certificate: (1) A statutory declaration stating that the nominal value of the company’s share
capital is at least €38,100, (2) a statutory declaration stating the amount paid, at the time of the application,
on the share capital of the company, (3) a statutory declaration outlining the preliminary expenses of the
company and stating which have been paid and which are payable, and (4) a statutory declaration stating
any payment or benefit to be paid to the company’s promoters (4 = 4 marks)
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Examiner’s Comments on Question Three
This question was one of the better-answered questions on the paper.
Part A:
The majority of candidates attained full marks in this component of the question.
Part B:
The majority of candidates could explain the nature of a single debenture, but were confused as to
the meaning of a series of debentures and debenture stock. Candidates lost marks for not reflecting
on the fact that a series of debentures may involve multiple lenders – who all lend on foot of a single
loan. Regarding debenture stocks, some candidates gave this a literal definition and discussed
floating charges on stock, rather than the nature of this loan.
Suggested Solution 3
A. Debenture: this was defined in Levy v Abercorris State & Slab Co. (1887) as a document that creates a
debt or acknowledges it – the debenture states the terms on which the company has borrowed money and is
issued by the company to the lender – it will state the principal sum of money to be repaid and the sum of
interest – the debenture gives the holder a series of safeguards and powers in the event that the company
defaults upon payment (2 marks) – information normally included in a debenture: (1) the obligation on the
borrower to repay the debenture holder the principal plus interest, as agreed, (2) it will specify the security
provided by the borrower in return for the loan, (3) it will list the events that will allow the lender to
enforce the terms of the loan and to request immediate repayment of the debt, and (4) it will include
provisions relating to the role and power of debenture holders (3 = 3 marks)
B. Types of Debentures: (1) Single Debenture – this document will consist of a single loan made between
the company and the lender – the lender may be a bank providing a long term overdraft facility to the
company (1 mark), (2) Series of Debentures – this consists of a series of separate loans made on different
dates by different lenders to the company – each of these loans comprises a part of an overall loan and each
debenture in the series ranks equally (in pari passu) in their right to security and repayment (2 marks), and
(3) Debenture Stocks – this loan is used by public companies only – where instead of a company creating a
series of separate debentures as above, a company will create debenture stock – this stock creates a loan
fund, which a number of lenders (the public) will invest money in on exactly the same terms and conditions
as stated in the debenture document – the terms of the borrowing are set out in a single Trust Deed
(2 marks)
Examiner’s Comments on Question Four
Part A:
This component proved a challenge for candidates, who tended to list all the statutory and fiduciary
duties of directors, rather than provide a detailed review of the specific statutory duty outlined in the
question. Candidates are advised that they should be able to discuss the specific obligations arising
in the context of directors’ duties.
Part B:
The majority of candidates attained full marks for discussing the rights of a director on removal.
Regarding the procedure for removal, there is still some confusion as to the notice period and type of
resolution required, and students are advised that this specific level of knowledge is required.
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Suggested Solution 4
A. Statutory Duty: Section 194 CA 63 requires disclosure by directors of any direct or indirect interest in
contracts or proposed contracts – this disclosure must be made to the Board at the first meeting at which
entering into the contract is proposed, or the meeting that they are aware of the conflict – this disclosure
must be made to a fully convened Board – this disclosure must then be entered into the record kept by the
company, which is open to inspection by officers or members (4 marks) – default results in the
commission of a criminal offence and the potential imposition of a fine (1 mark)
B. Removal of a Director: (1) a director can be removed from office by the passing of an ordinary
resolution at a general meeting, (2) extended notice of 28 days or more must be served by the company on
the shareholders indicating the intention to remove the director, and (3) a vote is then taken and if passed by
a majority of those present the CRO must be notified (2 marks) – Rights: (1) a copy of the resolution
proposing to remove the director must be given to the director concerned, (2) the director has a right to
make written representations and have them circulated by the company to all the members before the
general meeting, (3) if the representations are not sent they must be read out at the general meeting, and (4)
the director has the right to speak at the meeting (any 3 = 3 marks)
Examiner’s Comments on Question Five
Part A:
The majority of candidates correctly stated that a company could be fined for failing to appoint an
auditor. There was some confusion as to who could compel the appointment, including the ODCE
and CRO – whereas this issue falls within the Minister’s remit.
Part B:
The majority of candidates attained full marks in this component. Those who lost marks generally
did so arising from confusion between auditor rights and duties.
Part C:
This component was well answered and often resulted in full marks being awarded. Candidates are
advised to review the differences between director and auditor duties – as this caused some degree of
confusion.
Suggested Solution 5
A. Failing to Appoint an Auditor: where a company fails to appoint an auditor the Minister must be notified
within a week and the Minister is empowered to appoint an auditor – where the company fails to inform the
Minister that they have not appointed an auditor, this can result in the potential imposition of a fine
(1 mark)
B. Rights of the Auditor: (1) to access all written information regarding financial affairs of the company,
(2) to ask questions/request explanations by the company’s officers, (3) to call an EGM, (4) to be heard at
company meetings on any matter that affects him in his role as Auditor, and (5) to receive notice of all
company meetings (any 3 x 1 = 3 marks)
C. Auditor duties: (1) to investigate the financial affairs of the company – this requires the auditor to be
alert to any wrongdoings by company officers, (2) to report to members (Section 163 CA 63) – this requires
the auditor to report to the members on the accounts examined by them, and on every balance sheet, profit
and loss account, and all group accounts laid before the company in general meetings during his/her term of
office – the Auditor must state whether in his opinion the accounts reflect the company’s true and fair
financial position – the content of the auditor’s report must be accurate, precise and unequivocal, (3) to
report where a company fails to keep proper books of account (Section 74 CLEA 2001), (4) to report any
suspicion that company officers have committed an indictable offence (Section 194(4) CA 90 & Section 74
CLEA 2001), (5) auditors are required to act with professional integrity (Section 193 CA 90) and act within
the ethical and legal standards of the profession, (6) the auditor must comply with the obligations of the
Finance Act (Section 172 Finance Act 1995) – this requires the auditor to report suspicions of taxation
breaches to the Revenue Commissioners and to the company – and request rectification by the company,
(7) the auditor is also obliged to act with due care and skill in the performance of his duties – this requires
that the auditor does not perform his duties in a negligent manner (any 3 x 2 = 6 marks)
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Examiner’s Comments on Question Six
Part A:
The concept of liquidation was well explained by the majority of candidates. However, there was
some confusion over the concept of receivership. A large portion of candidates confused it with the
concept of examinership.
Part B:
Candidates appeared to misinterpret this component and often discussed the procedure to effect a
compulsory liquidation and not the grounds as asked by the question. Candidates are advised to read
the question carefully and only address the specifics of the question being asked.
Suggested Solution 6
A. Distinction: The objective of receivership is to enforce the terms of a debenture loan upon the default
of the borrower – therefore they sell the asset securing the debt and use the funds to repay the debt, whereas
the objective of liquidation is the dissolution of the company, through the sale of its entire assets of the
business – the funds raised are then used to pay the company’s debts in the order of priority – in so far as
this is possible (3 marks)
B. Grounds for Compulsory Liquidation: (1) the company has passed a resolution to liquidate, (2) the
company is unable to pay its debts – ascertained by the balance sheet test, or where a demand for payment
of a sum exceeding €1,270 is not satisfied within three weeks, where a judgment debt has been returned
unpaid – or where the Court is of the belief that the company is insolvent, (3) the company has failed to
commence trading within 12 months of formation or has failed to trade in the last 12 months, (4) the
company has failed to file an annual return for two consecutive years, (5) breach of minority rights, (6)
where the members of a company falls below the statutory minimum (any 4 = 4 marks) , and (6) where the
court considers it “just and equitable” to liquidate the business – (a) such as failure in substratum, (b)
deadlock in corporate management, (c) illegal or fraudulent objectives, or (d) corporate instruments of
fraud (any 3 = 3 marks)
Examiner’s Comments on Question Seven
This question produced a high caliber of answers in general.
Part A:
The majority of candidates could list the ordinary business of an AGM. Marks were lost where
special business was discussed.
Part B:
The majority of candidates correctly listed the priority of company debt. Some candidates are
confused regarding the distinction between preference debt and preference shares – others failed to
mention unsecured debt.
Part C:
Again, the majority attained full marks – incorrect answers dealt with abbreviations after the
company name, which although a requirement, does not fall under the remit of the Registration of
Business Names Act 1963.
Suggested Solution 7
A. General business of the AGM: (1) consideration of the accounts, (2) consideration of the Director’s and
Auditor’s reports, (3) declaration of a dividend, (4) retirement by rotation and re-election of Directors, and
(5) re-appointment/appointment of the Auditor (any 3 = 3 marks)
B. Priority of Payment of company’s debts upon liquidation: (a) the costs of liquidation, (b) the fixed
charges in the order that they were created (provided that they have been correctly registered within 21
days), (c) the preferential debts (taxes outstanding, employee wages, annual leave entitlements, and local
authority rates and charges), (d) the floating charges in the order they were created (provided that they
have been correctly registered within 21 days), (e) the unsecured creditors, and (f) the residue to the
shareholders (3 marks)
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C. Company names considered undesirable: (1) names that are classed as offensive, immoral or
blasphemous names, (2) names suggesting a connection with any government department, local authority
or State agency, where no such connection exists (3) a name that uses “bank, society, co-operative or
insurance” in its name, unless it has obtained the appropriate permission from the Minister, (4) a name that
includes a registered trademark, without production of the consent of its owner, (5) a name that it regarded
as being misleading or confusingly similar to a registered name, or (6) a name of an existing company
(any 4 = 4 marks)
Examiner’s Comments on Question Eight
Part A:
Although most candidates correctly named the Treaties – there was confusion as to the actual
objectives of each of the Treaties.
Part B:
The role of the Parliament was often confused with the role of other EU institutions, and candidates
need to review this topic. The majority lost marks for not addressing this institution supervisory
role, and its role regarding the EU budget.
Suggested Solution 8
A. EU Treaties: (1) The Treaty of Rome 1957: this Treaty founded the European Community and set out
to harmonise the individual member state’s economic policies and encourage development of economic
activities, by creating a common market that facilitates the free movement of goods, services, people and
capital – this Treaty also established the Institutions of Europe, (2) The Single European Act 1987: the aim
of this Treaty was to advance European economic and political integration – this Treaty created policies,
such as the removal of trade barriers between member states to reduce competition, in order to achieve the
objectives of the EU and it also increased the voting power given to the European Parliament, (3) The
Maastricht Treaty 1993: this Treaty replaced Community with Union (EC to EU) – this Treaty, unlike
previous Treaties, created policies to enhance economic and political integration, for example, the concept
of ‘European citizenship’ and the establishment of the process for implementation of a ‘single European
currency’, (4) The Amsterdam Treaty 1997: this Treaty involved policies on social integration, including
immigration, public health, equality and employment – this Treaty implemented a national employment
policy to tackle the problem of unemployment in member states – and established goals to be reached
within certain timeframes with the aim of creating new jobs for individuals in all member states, (5) The
Nice Treaty 2001: this Treaty does not introduce new policies, but amended existing policies in previous
Treaties, to cater for the enlargement of the EU from 15 to 25 member states, and now 27 member states –
this Treaty includes, for example, changes on how power will be divided between the EU institutions after
enlargement, and (6) The Lisbon Treaty 2009: the purpose of this Treaty was to make the European Union
more democratic by raising its standards on accountability, transparency and participation – this Treaty
contains the EU Charter for Fundamental Rights, which lists the human rights recognised by the Union
(any 3 x 2.5 = 7.5 marks)
B. European Parliament: The Parliament is an advisory and supervisory EU body, which has three main
roles: (1) it has a supervisory role over the other political institutions, (2) the Parliament has joint
responsibility for the budget and how it is utilised, and (3) it shares legislative responsibility with the
Council of Ministers, through the co-decision procedure (2.5 marks)
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Examiner’s Comments on Question Nine
Part A: marks were lost where candidates discussed the rules regarding contract formation in general or the
general rules on consideration as opposed to the specific rule asked. To attain full marks the rule should have
been explained and supported by relevant case law. Nonetheless the majority of candidate drew the correct
conclusion to the problem presented.
Part B: The majority of candidates drew the correctly explained the concept of necessaries and gave relevant
examples. There was confusion in relation to beneficial contracts of service – particularly in relation to whether
the minor was recipient or the provider of the service.
Suggested Solution 9
A. Consideration – Sufficiency and Adequacy: this rule recognises that consideration must be sufficient
(recognised by law) but need not be adequate (the quantum amount is irrelevant) – provided there is
consideration in the contract and it is a minimum economic value then the consideration is valid – it is not a
question of a “good bargain”, but rather an honest one – in effect, this means that the consideration does not
have to equate to market value of the goods/services) – this principle has been applied in cases such as
Chapple v Nestle (1960) and Thomas v Thomas (1842) – however, the inadequacy of the consideration may
(in some situations) alert the court to the existence of fraud or duress – such as arose in Noonan (A Ward of
Court) v O’Connell (1987) (5 marks) – conclusion that this contract is valid as the €35 price per person
each way is sufficient consideration and Mackenzie is not legally obliged to pay the additional €315 per
person cost to Transatlantic Airlines (1 marks)
B. Contractual Capacity of Minors: the Sale of Goods Act 1893 defines contracts for necessaries as goods
suitable for the condition in life of that infant or minor and to his actual requirements at the time of sale and
delivery – examples would include food, clothing etc… (2 marks) – whereas a beneficial contract of
service is defined as a contract of service beneficial as a whole to the minor and not in any way oppressive
to that minor – examples include contracts of education or training, and contracts that enable a minor to
earn a living (2 marks)
Examiner’s Comments on Question Ten
Part A:
The majority of candidates could explain two tests used to distinguish between contracts of and
for services. To attain full marks, candidates are advised that reference to relevant case law is
mandatory. Incorrect answers reflected on factors and not the actual tests. Lecturers are advised
to highlight this distinction when teaching this topic.
Part B & C:
Most candidates drew the correct conclusion and could explain two rights on termination. Some
candidates discussed employee rights in general and not in the context of termination (which
was specifically asked). Candidates are advised to read the questions carefully and only address
the specific question being asked.
Suggested Solution 10
A. Tests: (1) Control Test: questions whether the employer controls all aspects of the employees work – in
effect have they control over the work done, the method of completion, the means employed to achieve the
result, and the time and place the task is to be done – there are inherent problems with the test in the context
of professional workers – who are subject to limited control – such as in Tierney v An Post (2000), (2)
Integration Test: this test asks whether the worker is employed as part of the business, and the work done is
integral to the business – the application of this case was illustrated in Re Sunday Tribune (in Liquidation)
(1984) and in Kelly v Irish Press (1985) in the context of journalist/editors who were described as
contractors but integrated into the business – the main problem with the integration test is the difficulty in
application to small businesses, (3) Enterprise Test: this test questions whether the person has engaged
himself to perform services as a person in business on his own account – it asks whether the worker has
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made a financial investment in the work, can he reap a reward/profit from effective performance of the job,
and whether there is a financial risk is undertaking the work – in McDermott v Loy (1982) the lack of
entrepreneurship indicated an employee relationship – problems with the enterprise test arise in the context
of employees paid on a commission basis, (4) Mixed/Reality Test: in this test all factors are considered
equally (more focus on control in the mixed test) and an overview is taken – relevant factors include:
method of pay, right to select and dismiss, ability to delegate performance of duties, provision of training
and equipment, level of financial risk undertaken by the worker, whether the worker has the opportunity to
profit from effective management of the task – the application was seen in Mahon v Henry Denny & Sons
Ltd 1997 where the worker was classified as a employee by taking a holistic view of all aspects of the
working relationship (any 2 x 3 marks = 6 marks)
B. Conclusion: Luther is a contractor as he is not subject to the general control of Leyton Publications
regarding his work – this is demonstrated by the fact that he can bring his son in to help with deliveries –
there is evidence of entrepreneurship as he provides his own vehicle and is responsible for its maintenance
and upkeep – however, there is some evidence of integration in that he has access to a subsidised staff
canteen and a 20% discount card – however, from a reality perspective the balance of his employment
attributes indicate that he is more likely to be classed as a contractor than as an employee (2 marks)
C. Rights if Luther is an employee: (1) the right to redundancy for the loss of his job – the amount of
payment is 2 x length of service + a bonus week x weekly salary (capped at €600) i.e. 2 x 6 + 1 = 13 x
weekly salary or €600, whichever is the less, (2) the right to notice depending upon the terms of the
contract or legislation (4 weeks as per the Minimum Notice and Terms of Employment Act 1973), (3) the
right to time off during notice period: this is to look for new employment, attend interviews or training
courses, and (4) the right not to be unfairly selected for the purpose of redundancy – as this can be classed
as an unfair dismissal (any 2 = 2 marks)
Examiner’s Comments on Question Eleven
Part A:
The majority of candidates could explain the meaning of the term injunction, but did not comment
on the two types (interim and perpetual). Marks were awarded for relevant examples in this
component.
Part B:
Candidates were confused between the concepts of general and special damages and often mixed up
the two concepts – although some marks were still awarded when this arose. Some candidates gave
the terms literal interpretations, and lost the available marks.
Part C:
Candidates appeared confused between the concept of punitive damages and nominal damages and
are advised to review this area – as the concepts are the exact opposite of each other.
Suggested Solution 11
A. Injunction: This is an Order of the Court compelling a person to do a specific thing (mandatory
injunction) or preventing a person from doing a specific thing (prohibitory injunction) – an injunction is
classed as an equitable remedy and therefore granting it is at the absolute discretion of the Court – it is
usually awarded when there is a legitimate legal case to answer and where the balance of probabilities lies
in favour of granting it (2 marks) – there are two main types: (1) an interim injunction – granted on a short
term basis pending a full hearing of the legal issues, and (2) a perpetual injunction granted following a full
hearing of the case (1 mark)
B. General and Special Damages: Special damages are awarded for out of pocket expenses incurred as a
result of the defendants actions – they are generally capable of being calculated and are usually divided into
two distinct headings, loss of actual earnings and medical expenses – they can also relate to expenses
arising out of property damage (2 marks), whereas general damages are damages awarded for the civil
wrong committed, but which are not capable of simple calculation – this could include damages arising
from pain and suffering as a consequence of a physical injury or mental distress, as well as future medical
expenses, loss of future earnings, diminution of quality of life etc (2 marks)
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C. Punitive Damages: These are damages awarded as an additional measure to the plaintiff in cases where
the Court strongly disapproves of the defendants behaviour, and to punish/make an example of the
defendant – generally, they are only awarded where the actions of the defendant are sufficiently egregious
and where the Court believes that actual loss is not sufficient to sanction this behaviour (2 marks) – an
example of this could arise in a defamation case, where rather than admit they are wrong the defendant
states that they can prove the truth of their statement and then cannot do this when the case goes to hearing
(1 mark)
Examiner’s Comments on Question Twelve
Part A:
The majority of candidates could outline five methods to discharge an agency contract. There was
some confusion by a small sample of candidates between discharge and creation.
Part B:
Although candidates tended to draw the correct conclusion in this component, a large portion did not
define the concept of agency by necessity, outline its elements or use case law to support their
answer. Candidates must explain the law fully from an academic perspective to attain full marks.
Suggested Solution 12
A. Termination of agency: An agency agreement may be terminated in the following ways: (1) by the
actions of the parties through either (a) mutual consent – provided that there is payment in full, (b) through
renunciation by the agent, or (c) by revocation by the principal, (d) through notice (as per the agency
agreement or if there is no express agreement – 1 month if the agency is less than 1 year, 2 months if the
agency is less than 2 years or 3 months if the agency existed for more than 3 years) – or (e) completion of
the transaction, or (2) by operation of law ((a) through the death, insanity, bankruptcy of the parties, (b)
through the expiration of an agreed time, (c) by the doctrine of frustration – an unforeseen event which
means that the agency agreement cannot be completed as agreed, or by (d) an intervening illegality
(any 5 = 5 marks)
B. Agency by operation of law/ necessity – this is where a contract of agency is implied to exist in the
event of extraordinary circumstances – in effect, where an emergency situation arises relating to the
transportation of goods or where one person has possession of another’s goods they may become an agent
of necessity (1 mark) – for this to occur the following factors must exist: (1) the agent must be entrusted
with the goods of the principal, (2) an emergency must arise, (3) the agent must attempt to contract the
principal to obtain instructions and be unable to do so, and (4) the agent must be acting in good faith and in
the best interest of the principal & to protect the principal’s interest – in these circumstances the Court will
imply that you are acting as an agent of necessity, examples include: Great Northern Railway v Swaffield,
1874, Sachs v Miklos (1948), Springer v Great Western Railway (1921) (3 marks) – conclusion that an
agency of necessity exists between Dalton and Percy (there was an emergency, Dalton was un-contactable,
Percy was acting to protect Dalton’s interest) – therefore Percy can recover the value of the bills from
Dalton (1 mark)
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Examiner’s Comments on Question Thirteen
Part A:
The majority of candidates could define the concept of delegated legislation and provide examples.
Marks were lost where candidates confused the concept with EU Directives.
Part B:
Candidates lost marks where they explained the concept of an offer, but not a unilateral offer (which
was asked). To attain full marks the concept should have been explained, with a commentary on
how it is accepted, and the theory should have been supported by relevant case law/examples.
Again, candidates are advised to read the questions carefully.
Part C:
The majority of candidates correctly explained the concept of constructive dismissal and the burden
of proof. Incorrect answers confused the concept with fair and unfair dismissals.
Suggested Solution 13
A. Delegated Legislation: This is secondary legislation and refers to laws passed by bodies (such as a
government Minister or a public or local authority) other than the Oireachtas, where the right to delegate
legislation has been given to them under the terms of the primary legislation (2 marks) – examples include:
(1) Orders: these are instructions, (2) Rules: these establish guidelines in relation to practice and procedure,
(3) Statutory Instruments: these are laws enacted in give effect to a provision contained in a principal Act,
(4) Regulations: these are laws explaining provisions contained in legislation, (5) Bye-Laws: these are laws
regulating a particular area or domain under the control of a relevant authority, and (6) Schemes: these are
laws regulating the charging of fees (reference to any 2 = 1 marks)
B. Unilateral Offer: This can be defined as an offer to the world at large that requires an action to accept –
and where acceptance must be performed and cannot just arise by communication of acceptance –
regarding revocation of a unilateral offer, as performance and acceptance are classified as the same thing, in
order for a revocation to be valid it must occur before the offeror is aware that performance has commenced
– once performance has started the offer cannot be retracted – generally, a unilateral offer should be
revoked in the same manner as the offer was made – case examples include: Billings v Arnotts (1945), and
Carlill v Carbolic Smoke Ball Company (1893) (4 marks)
C. Constructive Dismissal: this is where the employee terminates the contract under which they are
employed because of the conduct of the employer – the conduct of the employer must be sufficiently
serious as to entitle the employee to resign from their employment – it is imperative in this situation that
the employee exhausts all internal dispute resolution processes before tendering their resignation (2
marks) – in this instance the onus lies on the employee to prove that what has happened amounted to a
dismissal (1 mark)
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