Company and corporations Applications

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Company and corporationsApplications

• Dr. Mitja Kovac, LL.M.
• 06.11.2009

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Excursion to Gorika brda

• -Departure Saturday, the 14th of November, at
  8.30 (infront of the Faculty of Economics)
• -10 oclock entrance into the kocjanske caves
  system (UNESCO)
• -13.30 arrival to family ibav winery in Gorika
  brda (Neblo)
• -18.00 arrival to Ljubljana

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Duty of disclosure Law v Law (1905)

• Borthers William and James Law were partners in a
  wollen manufactures business in Halifax. William
  lived in London and did not take a very active
  part in the business and James offered to buy
  Williams share for 10.000. After the sale
  William discovered that certain amount of money
  that was lent on a morgage, had not been
  disclosed to him by James. William brought an
  action against his brother James for
  misrepresentation. Does he has any right?

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Answer

• Court decided that there was a duty of disclosure
  in this sort of case and the action was settled
  by the payment of 3.500 to William, which he
  accepted in discharge of all claims between him
  and his brother.
• There is a positive duty of every partner to give
  true accounts and full information regarding all
  things affecting the firm to any partner. Silence
  can amount for misrepresentation as between
  partner and partner!
• The duty of disclosure arises also at the
  negotiation or pre-contract stage of the
  arrangements.

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Partner by estoppel

• A rule
• Everryone who by words, spoken or written, or by
  conduct, represents himself, or knowingly allows
  himself to be represented, as a partner in a
  particular firm, is liable as a partner to anyone
  who has, because of that, given credit to the
  firm or advanced money to it.
• Altough such a person is not truly a partner, he
  may be sued by a client or creditor who has
  relied on the fact he was a partner.

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Tower Cabinet Co Ltd v Ingram (1949)
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Model form of ordinary partnership

• Disscussion.

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Object of a company

• The company FastRail was formed for the purposes
  of making and selling railway waggons and other
  railway plant. It got a contract to build a
  railway system in Belgium and entered into an
  agreement under which Riche was to be a
  subcontractor in this excersice. The company Fast
  Rail later ran into difficulties and the
  directors told Riche that his contract was at an
  end. He sued for breach of that contract. Is the
  company and members of FastRail liable?

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Ashbury Railway Carriage Iron Co. V Riche (1875)

• The House of Lords decided that he had no claim
  because the contract which the company had made
  to construct the railway system and of which he
  was a subcontractor was ulltra vires and hence
  void. On a proper reading of the objects, the
  company had power to supply things for railways
  but had no power actually to make them.

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Super speed air Ltd (2009)

• Super speed air Ltd has suffered declining
  profits for four years. The directors have not
  declared a dividend for three years and in order
  to avoid facing the shareholders did not call an
  AGM last year.
• Marco, who holds shares in Super speed air Ltd,
  has got together with some of his fellow
  shareholders to form a group to see what can be
  done to get company better managed.
• What would be your advice to Marco?

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Legal effects of articles

• The articles of Association provided that any
  dispute between a member and the company must be
  taken first to arbitration. Petra, as a
  shareholder, who is complaining that she was
  wrongfully expelled from the company, took her
  case to the High Court in Ljubjana. Would she be
  successful?

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Hickman v Kent or Romney Marsh Sheep Breeders
Association (1915)

• The court decided that the action could not
  continue in the High Court. Hickman was
  contractually bound by the articles to take
  dispute to arbitration first.
• The members are bound to the company by the
  provisions of the articles!

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• Mr. Tai, who was a director of Southern
  Foundries, was appointed managing director of
  that company for 10 years by a contract outside
  the articles. The company was taken over by
  Federated Industries. With their voting power
  they altered the articles to provide the
  Federated Industries had power to remove any
  director of Southern Foundries and that a
  managing director of Southern Foundries must also
  be a director. Mr. Tai was subsequently removed
  from his directorship and therefore could not
  longer qualify as managing director and his
  contract was terminated while it still had some
  years to run.
• What shall we do with Mr. Tai?

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Southern Foundries Ltd v Shirlaw (1940)

• House of Lords decided that the company was
  liable in damages. Altough a company always had a
  legal right to change its articles, if by doing
  so it caused a breach of an outside contract,
  then, while the alteration could not be
  prevented, the company was liable in damages if
  there was a breach of a contract outside of the
  articles as a result of the alteration.