Sample Tutorial Answers (HBL221N Company Law)
To answer all legal questions, students are to follow the essential steps of: (1)
Identification of the issues in the questions;
State the relevant laws that can be used to resolve the issues in the questions; (3)
Application of the relevant laws to the facts in the questions to resolve the issues in
the questions (i.e. arguments); and (4)
Conclusion based on arguments in Point (3). Your conclusion must resolve your
issues in Point (1). NOTE: USE THESE SAMPLE ANSWERS AS A REFERENCE ONLY! THESE ANSWERS WILL NOT HELP YOU PASS YOUR EXAM!
Bristow is a substantial shareholder in Chester-Perry Industries Ltd. A business
competitor, Gun and Fames Pty Ltd, is selling in great volume a cookbook similar to
one in respect of which Chester-Perry Industries holds the copyright. Bristow
believes his company has incurred a substantial loss and his own shares have been
reduced in value by $150,000. His solicitors believe an infringement of copyright has
occurred. Eccles and Pollock are the directors of Chester-Perry Industries Ltd. They
state that they have decided not to litigate because they believe that to take legal
action for infringement of copyright is too expensive and risky. Bristow is unsure
whether the directors of Chester-Perry Industries have any interest in Gun and Fames
Pty Ltd. On the general principles laid down Salomon’s case, can Bristow sue Gun &
Can Bristow sue Gun & Fames on behalf of Chester-Perry as a shareholder in
Chester-Perry? Relevant law: Salomon.
The House of Lords in Salomon held that upon incorporation, a company
becomes a separate legal entity even though its issued shares are beneficially
by the same person like in Salomon.
Similarly in this question, Chester-Perry is a company that has been
incorporated and therefore, is a separate legal entity from all its shareholders.
case, according to Salomon, Bristow who is a shareholder of Chester-
Perry cannot sue Gun & Fames on behalf of Chester-Perry as a company
is separate from its shareholders. Conclusion:
Bristow cannot sue Gun & Fames on behalf of Chester Perry due to the
principle laid down in Salomon where upon incorporation Chester Perry is
considered as a separate legal entity from all its shareholders, including
The Constitution of Big Hopes Pty. Ltd. includes the following provisions:
Rule xi: On any increase in capital the new shares must be offered to members in
proportion to their existing shares.
John (an existing shareholder) is distressed when an allotment of a new issue is not
made to him. What legal action (if any) may he take?
What action can John take against Big Hopes for failing to allot new issue of
shares to him according to Rule xi of the Constitution?
Relevant law: s.140(1)(a) CA 2001.
s.140(1)(a) states that a constitution of a company is a contract between the
company and its shareholders. In this essence, both the company and its
shareholders are bind by the constitution.
In this instance, Rule xi of Big Hopes’ constitution states that new shares must
be offered to existing shareholders as per their existing shares. However, Big
Hopes failed to allot new shares to John as according to his existing shares and
have therefore breached its contractual obligation in the constitution under
John can take an action against Big Hope under s.140(1)(a) for breaching its
contractual obligation in its constitution for failing to allot the new shares to
John as per his existing shares.
John, Ringo, George and Paul incorporate Big Hopes Pty Ltd for their property
development business. Big Hopes Pty Ltd was empowered under a provision in its
constitution to appoint a managing director....
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