LEGT2741 Case Note

ASIC v Adler [2002] NSWSC 171(HIH collapse)

ASIC v Hellicar [2012] HCA 17
Shafron v ASIC [2012] HCA 18
Gillfillan v ASIC [2012] NSWCA 370 [known as the James Hardie case]
ASIC v Healey [2011] FCA 717 [known as the Centro case]
ASIC v Rich

Week 2 Lecture

Duke Group Ltd v Pilmer

Significance
o In order to meet this criterion (acting in common), it is not necessary
that each of the alleged partners should take an active part in the
direction and management of the firm.
o The business may well be carried on by or on behalf of the partners by
someone else. The person carrying on the business must be doing so as
agent for all the other persons who are said to be partners.

Smith v Anderson (1880) 15 Ch.D. 247; A&B. No.22

Facts
o A trust was created for investment purposes to purchase shares and
debentures in a number of companies. Smith, an investor and holder of
trust certificates, applied to wind up the trust on the basis that it was
not a trust but an illegal partnership that exceeded 20 people.

Issue
o Was this a trust of a partnership?

Decision
o Held that it was not a partnership because the act being undertaken was
isolated and there was no intention to repeat the venture. The court
focused on the expression carrying on.
o It implies a repetition of acts and excludes the case of an association
formed for doing one particular act that is never to be repeated. That
series of acts is to be a series of acts which constitute a business

United Dominions Corporation Ltd v Brian Pty Ltd

Facts
o UDC and Brian were members of a joint venture with another company
SPL. Prior to forming the joint venture UDC and SPL entered into a
contract involving the proceeds of the future joint venture if SPL failed
to repay money lent to it by UDC. Brian was unaware of this contract.
o During the course of the joint venture UDC took all of the profits and
relied on the previous contract. The joint venture agreement specifically
stated that the participants were joint venturers not partners.

Issue
o Did a fiduciary relationship exist between UDC and Brian even though
they were involved in a joint venture?

Decision
o There was a fiduciary relationship between UDC and Brian and UDC was
ordered to pay Brian his share of the joint venture profits.
o A fiduciary relationship (duty of good faith, loyalty and honesty) may and
ordinarily will exist between prospective partners who have embarked
upon the conduct of the partnership business or venture before the precise
terms of partnership agreement have been settled.

Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance)
Ptd Ltd

Facts
o Fourth Media Management was a promoter that managed the Australian
tours for Cilla Black and Elton John. Volume Sales agreed to finance the
tours. A written agreement was entered into in which Fourth Media
Management agreed to assign to Volume Sales a half interest in the
contracts in the basis of a joint venture.
o The finance advanced by Volume Sales was described as a loan to the
joint venture. The net profits were to be divided at the end of the
contract.
o All matters were to be agreed by the parties and any losses were not to
be shared on the same basis as the profits. Subsequent to the agreement
with Volume Sales, an equitable charge (type of security) was granted to
Canny Gabriel (a third party) on the basis of additional finance being
advanced by the party.

Decision
o Partnership on the basis that profits were being shared equally between
the parties and the management and the conduct of the arrangement
was dictated by their joint agreement.
o Joint venture label has no effect on the courts judgment.
o It seems to us that the contract exhibited all the indicia of a partnership
except that it did not describe the parties as partners and did not provide
expressly for the sharing of losses, although we venture to think that it did
so impliedly.

Checker Taxicab Co Ltd v Stone

Facts:
A driver hired a taxi car from the owner of a garage. The written contract
provided for the taxi to be returned to the owners garage in good
condition after each use. The driver met the expense of running the car
and paid an agreed percentage of his earnings derived from this activity.
In a dispute between the parties, the court had to determine the
relationship between the owner and the driver of the taxi
Decision:
The relationship was not a partnership because it was not a business
being carried on by persons in common. The arrangement comprised two
distinct and separate businesses. The owner exercised no control over the
driver. There was no evidence of mutual rights and obligations between
the owner and the driver. The absence of acting in common meant that
the relationship was not a partnership.


Beckingham v Port Jackson and Manly Steamship Co. [19571 S.R. (NSW) 403;
A&B No.23

Facts
o A syndicate purchased a submarine with the purpose of having it open
to the public who could enter and tour by paying an entry fee. The
syndicate contracted with the Steamship Company to pay rent for wharf
space and to share the profits of this business venture with the
Steamship Co. The agreement stipulated that the syndicate was to
remain at all times in the ownership and possession of the syndicate.
o During a storm the Steamship Co. arranged for the submarine to be
towed into more open waters. During the towing the submarine was
wrecked. The syndicate sued the Steamship Co. for damages caused by
their negligence.

Issue
o What was the true status of the parties relationship - that of partners or
agents?

Decision
o A partnership did not exist.
o It is clear that the parties sought to avoid the creation of a partnership
and in particular, to prevent any authority from arising in the syndicate..
to pledge the credit fo the Steamship Company or the creation of any
liability in the Steamship Company to third parties the Steamship
Company is expressed to act as agents for the syndicate to manage the
syndicates business of exhibiting the submarine - all this for reward to the
Steamship Company in the form of a fixed annual rental and a percentage
of the net proceeds of the admission charges.

Significance
o Share of profits is not sufficient to constitute a partnership.

Re Megevand: Ex parts Delhasse (1 887-78) 7 Ch.D. 51 1; A.&B. No.24

Facts
o C lent 10.000 pounds to A and B to start a business. The written contract
stated:
o C was not a partner and it was a loan (creditor)
o C was to share profits and losses up to 25%
o C was entitled to examine the partnership books anytime
o C was entitled to a quarterly statement
o The loan was not repayable until the partnership was dissolved
o The loan was the firms only capital

Issue
o Was C a creditor or a partner?

Decision
o The loan agreement suggested that C was a dormant partner.
o If ever there was a case of partnership this is it. There is every element of
partnership in it. There is the right to control the property, the right to
receive profits, and the liability to share in losses.

Mercantile Credit Co v Garrod

Facts
o A and B were partners in a garage business. Without authority from B
and in breach of partnership agreement, A sold a car which did not own
to C.

Issue
o Could C sue B, an innocent partner, to recover the purchaser price even
though A was acting in accordance with the agreement?

Decision
o C was able to get a refund from innocent partner because the sale was
an act for carrying on in the usual way business of the kind carried on by
the firm.

Goldberg v Jenkins

Facts
o A partner borrowed money at 60% interest when normal rates were 6-
10%.

Issue
o Did the loan agreement bind the firm?

Decision
o The unrealistic rate of 60% interest was beyond the usual way and the
rest of the partners were not bound because of the excessive interest
rate.
o A partner can only bind his co-partners by conducting the business in a
way in which the businesses are ordinarily conducted, and consequently
has no authority to go outside the ordinary mode of transaction business

Polkinghorn v Holland

Facts
o A solicitor in a firm gave one of their clients negligent advice regarding
investments. Client sued all the partners to recover compensation for
the loss suffered.

Issue
o Were the innocent partners liable for the fraudulent activities of the
other partner?

Decision
o The giving of investment advice was within the scope of the errant
partners authority as a solicitor of the firm. The innocent partners were
liable for the loss suffered by the client.

National Commercial Banking Corp v Batty

Facts
Issue
Decision

Lynch v Stiff

Facts
o Williamson, a lawyer, practiced under the name of John Williamson and
Sons. The firms letterhead included the name of D as a partner.
o P always dealt with D for legal advice and invested money with the firm
which was stolen by Williamson.

Decision
o P successfully sued D for compensation on the basis that D was held out
to be a partner and credit was given to the firm based on the
representation.

Birtchell v Equity Trustees

Facts
o A partner in a real estate firm shared profits with the firms client arising
from land speculation activities without disclosing this information to
the other partners in the firm.

Decision
o The court ordered the partner to account to the firm for all profits
arising from the resulting conflict of interest.





Chan v Zacharia

Facts
o Chan and Zacharia, partners in a medical practice, dissolved their
partnership. Lease on the premises in which they conducted their
surgery, was a valuable asset of the firm. Option to renew the lease had
to be undertaken by both the partners. After dissolution, but before the
winding up of the partnership affairs, Chan sought to exclude Zacharia
from practising there by taking up a new lease in his own name alone. In
this way, Chan sought to continue the medical practice on his own.

Decision
o Chan breached his fiduciary duty by failing to act with perfect fairness
and good faith and was accountable for that private profit.
o Chan abused his fiduciary as a trustee and former partner to seek an
advantage for himself
o He subjected the performance of his fiduciary obligations to the pursuit
of his personal interest.

ASIC v Citigroup Global Markets Australia

Facts
o Information communicated to a trader at the bank was alleged to
constitute insider trading by the bank. The communication came from
the traders manager. A senior manager of the advisory arm of the bank
informed the traders manager that as a result of the traders purchases
in Patrick Corporation we may have a problem. The traders manager
told him to stop buying shares in Patrick Corporation.
o The bank was advising Toll Holdings about a possible takeover strategy
against Patrick Corporation. The trader thought that he was being
reprimanded for an inappropriate investment portfolio selection and
sold the Patrick Corporation shares.

Issue
o Insider trading?

Decision
o Insider trading claims failed.
o Trader was not an officer of Citigroup and therefore his knowledge of
the information when he made the trades could not be attributed to the
company. Company also had a valid Chinese wall defence under s 1043F.


Salomon v Salomon & Co Ltd

Facts
o Salomon formed a company to the satisfaction of corporate
requirements. When the company went into liquidation, the company
could not pay both the secured (Salomon) and the unsecured creditors
(third party) on the basis of meeting priority claims.

Issue
o Was the company acting as a trustee for the beneficiary, Mr. Salomon. If
so under the law of trusts a trustee was entitled to an indemnity from
the beneficiary for debts incurred as trustee.

Decision
o The company was a "separate legal person", even though Salomon had
exercised a high level of management of the company's affairs.

Bradley Egg Farm Ltd v Clifford

Facts
o Bradley Egg Farm Ltd [Plaintiff] had its poultry tested by an employee of
an unincorporated association, Lancashire Utility Poultry Society, to
check if the birds where infected by any disease. This association was
formed for the purpose of providing various technical services to its
members. The test conducted by the employee was negligent-as a result
the birds either died or had to be killed. Plaintiff sued the members of
the committee for breach of contract. Committee members argued that
they were not liable.

Decision
o Committee members were found to be personally liable in damages for
breach of contract

Smith v Yarnold

Facts
o Smith, a spectator at a greyhound race, was injured when the
grandstand collapsed. The race was organised by the Taree Greyhound
Racing Club, an unincorporated association. Smith sued Yarnold, a
committee member. The legal action was under both tort (occupiers
liability) and contract (purchase of ticket).

Issue
o Were Yarnold and the other committee members liable?

Decision
o Court held that the committee was liable as occupiers of the premises.