Legt 2741 Assignment

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LEGT2741 Assignment
There are three main parties to this case; Flywell Ltd (F), the parent company, Jetover Ltd (J), the subsidiary, and the Australian Pilots Association (APA) which is representing the 200 pilots currently employed by J. F incorporated J as a wholly owned subsidiary of F and appointed four directors for J from the six directors of F. Two hundred of F’s pilots were made redundant and immediately rehired by J on lower wages and entitlement previously enjoyed at F. New pilots hired by F receive 20% more pay and entitlements for the same work than pilots of J.
The issue here is that are the original contractual entitlements received at F applicable to the pilots of J?
Firstly it must be emphasised that through incorporation J is a separate legal entity from its founder, shareholders and directors as demonstrated in the landmark case of Salomon v Salomon & Co Ltd . Lord Halsbury LC made the judgement that once a company is legally incorporated it must be treated as a separate legal entity. This important legal principle is accounted for in the Corporations Act 2001 s124(1) which states that “a company has the legal capacity and powers of an individual” .
Since J is a separate legal entity, it can be argued that the contract between J and its pilots is a new contract which bears no relationship to the pilots’ former contract with F. This is portrayed in Bank of Tokyo Ltd v Kanoon , where the parent (Bank of Tokyo) and the subsidiary (Bank of Tokyo Trust Co) were deemed to be economically one, however under the law, the separation was fundamental and cannot be bridged . Since the pilots accepted the job offer with J, the pilots are no longer employed by F and have no legal right to receive the same wages and entitlements as F’s employees.
However, the precedent in the Saloman Case is not gospel and the ‘corporate veil’ can be lifted in certain circumstances . If the company is used:
• as a sham to hide the real purpose of the controller
• to

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