legl601 commercial and corporation law question 1john always gets his car repaire

Question 1
John always gets his car repaired at Mikes Auto. He has been going there for 7 years and
takes his car there for repairs and service about twice a year. As he enters the door of Mikes
there is a sign on the wall behind the counter that says, All vehicles are accepted for repair
subject to the terms and conditions appearing in our invoice. The sign is on white paper (A4)
with Black writing, next to it are numerous advertisements for products sold at Mikes auto.
John never read the sign, he always dropped off his car on his way to work and was in a hurry.
When he returned to pick up his car the attendant would hand him an invoice to sign. This
had his name on it, the details of the car and the work done. The invoice stated:
1. The customer acknowledges that the agreed repair work has been satisfactorily
performed.
2. Mikes Auto regrets that no responsibility can be accepted for damage or loss caused
to the customers cars by fire, theft or otherwise.
On the occasion in question John left his car for some repair work to be done and followed the
usual routine set out above. When he returned to pick it up the next morning he signed the
invoice as above and went out into the yard to collect his car. To his shock he found that the
GPS navigation system fitted to the car was missing and the car clearly showed signs of being
in an accident.
The evidence shows that overnight thieves had broken into Mikes Auto and stolen the GPS
system from the car. Johns car was not locked, however, Mikes Auto was locked and the
alarm was on but the thieves managed to disarm the alarm system and get past the locks: it
was alleged it was an inside job but this could not be proven.
In addition, during the previous day the manager needed to go to a meeting. The car yard was
full of cars that day that were in for repairs and he could not get his own car out without having
to move many cars. Johns car was over near the curb so he decided to take it to get to his
meeting. By this time the repair work had been done and the manager thought it would be
good to see how it was running before John picked it up. He drove the car to his meeting and
parked it outside the cafe where the meeting was being held. While at the meeting someone
ran into the car causing damage to the rear of the car. They then drove off and were never
identified.
Required:
John seeks your advice as to whether Mike would be protected by the clauses in the invoice if
John were to take action against Mikes Auto. Answer this question by reference to general
principles of common law. Do not consider any statutory provisions you might think relevant.
Question 2
Peter, David, John and Lynette are directors (Directors) of a large public company, Australian
Motor Corporation (Company).
The Company has a sophisticated financial and accounting system which includes assessment
from both internal and external auditors.
In October 2013 the Directors passed a resolution to adopt the Companys 2013 Financial
Statements (Financial Statements) and to make the relevant declarations under section
295(4)(d) of the Corporations Act. The Directors passed the resolution without reading the
Financial Statements in any detail but rather relied on the internal and external auditors advice
that the Financial Statements were true and correct.
The Financial Statements incorrectly classified $900 million of current liabilities as non
current liabilities. This had the effect of giving a false picture of the solvency of the Company.
ASIC has now commenced proceedings against the Directors for a breach of section 180 of
the Corporations Act.
Required:
Advise the Directors. In your answer you should have regard to any defences under section
180(2) of the Corporations Act.
Question 3
Paul is the holder of the Governing Directors share in a family manufacturing company which
was incorporated in 2005 (Company). At the time of incorporation the other shareholders in
the Company were Pauls wife, Mavis who held three B class shares and Paul and Mavis
sons, Peter, Clive and Don, who each held one B class share each in the Company. Peter,
Clive and Don worked in the Company on a full time basis.
Pursuant to the constitution of the Company Paul, as holder of the Governing Directors share
in the Company, had vested in him all powers and authorities and discretion vested in the
board of directors. Paul, therefore, had complete control of the Company. Upon Pauls death
his Governing Directors share would convert to a B class share.
Pursuant to the constitution, whilst Paul remained the Governing Director, Mavis and Peter,
Clive and Don as holders of B class shares had no voting rights. However the constitution
provided that after the death of Paul the B class shares would carry voting rights.
Mavis died in 2012, leaving her three B shares in the Company to her three sons. Shortly
thereafter Paul formed a friendship with Cleo. Eventually Paul and Cleo married and Cleo
moved into the family home. Peter, Clive and Don did not get on with Cleo whom they regarded
as an opportunist and this view was reinforced when Paul advised his sons that he proposed
to issue a special category of shares to Cleo which would give her control over the Company
upon Pauls death. Cleo neither had experience nor qualifications in the manufacturing
industry.
In January 2014 Paul as Governing Director issued the special category of shares to Cleo
giving her control of the Company upon his death. The effect of the issue of the special
category of shares to Cleo therefore was to dilute the voting power of the B class shares
upon Pauls death.
Required:
Advise Peter, Clive and Don on whether Paul, by issuing the special category of shares to
Cleo, breached his duty to the Company pursuant to section 181 of the Corporations Act. Give
reasons having regard to the relevant authorities.

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