Merchantville credit co ltd v garrod (1962) case
Application of Corporation Act 2001 and Partnership Act 1892
Contents
Application of the legal principle 7
1st Legal Issue
In this case, there is a scenario of double agreement of a person named David, who worked as a sales representative for Nu Shampoo Pty Ltd for 8 years. He committed that if he left the company, then he would be engaged in this hair-product industry for five years. In 2017, when he left this Nu Shampoo Pty Ltd and registered in the Hair-Glo Pty Ltd; and got 99% of this company. The 1% of this share is got by his sister named Monica, who worked on his behalf and appointing him as an operational manager for Hai-Glo. In the market, the majority of the people know him from his employment with Nu Shampoo. Monica who did not act as an active part in the company got some loan amount of $1 million from the Standard bank in 2017. There was no security given to the bank against this loan.
This is a new company which did well in 2017 and 2018but in 2019; this company is unable to perform well and unable to install the certain loan instalment of $100,000 to the Standards Bank Ltd. At this bank, what will David do in case of the loan repayment? Also, the Nu Shampoo Pty Ltd pressurized him to cease his operating activities of Hair-Glo Ltd in South Australia. This is a critical situation in front of him because his employment contract with his former company prevent him from doing some operating activities in a new company and if he still works with the new company, then he breaches his employment contract with Nu Shampoo Pty Ltd.
Related Law
The corporation has a right to sue in its own named in case of contract breaching.
In case of Salomon v Salmon & Co Ltd, the decision was made on the concept of Principle of Separate Corporate Personality. In this case, a corporation, obligation and rights that are totally distinct from the other shareholders and has a separate legal identity (Charles Sturt University, 2019). The case of Solomon V Salomon- Doctrine of a separate legal entity based on the basic principle of a number of obligations and rules that in case of any breaching some contract then the company have a right to sue that individual. This Salomon v Salmon case is considered as the principle of the corporate veil. It is a landmark judgment cased in UK Company Law which states that share’s holders can’t be liable for the insolvency of the company’s insolvency.
Application of the legal principle
Salomon v Salomon- Doctrine of Separate Legal Entity Case
2nd Legal Issue
There is a second case where there are four friends named as Anne, Sarah, Jane and Mary, new graduate medical students. They decided to make a partnership based business in Western Sydney which they call your local doctors. For that purpose, they contributed $10,000 each in the development of medical healthcare center. But when Mary and Anne go overseas for one year and leave Sarah and Jane to run the business, then there is a great variation in the price range of all the supplier related products. Like when they come after one year, then they come to realize that Jane spent $2000 on purchasing the printer from her boyfriend business rather than the actual price of $1200 from the usual supplier.
Also, she ordered medical instrument of $13,000 from the United Medical Supplier Pty Ltd and Sarah ordered $2000 priced driving training course from Uber Australia Ltd. In this case, there are two major issues in front of Mary and Anne to critically consider all the price based activities of an organization. In this case, either Jane breached his duties in the partnership act or not. And the next issue is related to repayment of $13,000 to the United Medical Suppliers because in this case, Jane made her own decision regarding the purchasing of medical equipment. In this case which is liable to repay the amount.
Related Law
Application of the legal principle
Merchantville Credit Co Ltd v Garrod (1962) Case
This rule is provided by Mercantile Credit Ltd v Garrod (1962) 3 All ER 1103 where the partner of the same company agreed that they would never buy and sell the car. According to this case, each partner is liable for his act of transactions that impact the company’s policies.
Conclusion
After considering both cases, it is concluded that there is a lack of information regarding the company act 2001 and partnership act 1892 in the current scenario. There is need to follows the sections and their related laws in case of David like he must follow the obligation of his employment engagement with Nu Shampoo Pty Ltd and do not actively participate in Hair-Glo Pty Ltd. While in the second case, there is a need to breach the partnership contract with Jane according to the sections of Partnership Act. While in case of the $1300 amount payment to United Medical Suppliers Pty Ltd, the liability is applied on the Jane for this act. Mary and Anne have a right to sue her. This paper is informative regarding the effective implementation of the law.
