In acting as advisors for the Pilot’s Association Australia and Airlines Union Australia, we seek to explore the legality of the various actions of the Jetair Ltd.’s Board of Directors which ultimately lead to the hiring of a new staff body in New Zealand by JetairNZ Ltd at a lowered salary and the subsequent redundancy of Jetair Ltd.’s Australian-based senior managers and pilots. The outcomes sought by the various employee associations seek for firstly, the imposition of the Australian-based wage of Jetair Ltd.’s former senior managers and pilots upon the New Zealand-based staff of JetairNZ Ltd. The second outcome sought by the employee associations seeks for the retrenchment of the senior managers and pilots made redundant by Jetair Ltd. The third concern is with regards to ‘excessive’ remuneration of Jetair Ltd.’s board. In examining these concerns, there are a number of legal areas that must be examined: firstly the relationship between Jetair Ltd. and JetairNZ Ltd. as a related body corporate and the various duties owed to both companies by their Board of Directors; the duties owed by the Board of Directors to both companies and the body corporate as a whole and the possibility of conflict of interest; the duty of care owed by the Board of Directors to their employees and the company as a whole; and finally the exploration of the remuneration of Jetair Ltd.’s Board of Directors as a reflection of the current financial situation of the company. The argument for and against the pursuit of legal action will be based solely upon relevant legislation and case law; therefore the conclusions drawn will be the recommendation for the employee associations in regards to the pursuit of legal action. Related Bodies Corporate – Holding and Subsidiary Companies Given that conducting business with an Australian-based workforce operations, business proved to be cash-flow effective, but unprofitable – Jetair Ltd. has sought to pursue a differentiated corporate structure. In order to achieve this, Jetair Ltd. established a subsidiary, JetairNZ, in order to gain advantages that were previously unavailable. Incentives for the formation of a subsidiary, foreign or local, are provided for through both the rule of separate entity and limited liability. In the case of Jetair Ltd. the rules listed above provide for the existence of JetairNZ as a separate legal entity (although also functioning as part of the body corporate) with all of the same rights and obligations as any other registered company independent of its parent organization. The provision of limited liability as an individual company allows for the pursuit of extensive operations by the body corporate whilst remaining wary of liability in the case of insolvency of the subsidiary. Therefore, Jetair Ltd may be defined as the holding company whilst JetairNZ may be defined as a wholly-owned subsidiary. As the majority of the Board, three out of five directors, are controlled by Jetair Ltd. we can establish that the Board of Directors of JetairNZ is controlled by Jetair Ltd. From this we can assume that whilst JetairNZ enjoys the status of a separate entity and the overall corporate group is protected through the principle of limited liability; JetairNZ is in effect controlled by Jetair Ltd. Even though it is plausible to assume that Jetair Ltd. is in effect controlling the mind and will of JetairNZ the likelihood of piercing or lifting the corporate veil in order to determine without a doubt the timing, origin and motivation of JetairNZ’s decision to employ new personnel in conjunction with Jetair Ltd.’s decision to effect a mass lay-off is highly unlikely. Indeed a concise summation of this principle may be credited to Rogers J in Briggs v James Hardie & Co Pty Ltd (1989) ‘Even the complete domination or control exercised by a parent over the subsidiary is not a sufficient basis for lifting the corporate veil ’1. Given precedence, the Courts would be unwilling to...
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