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IMPORTANT SECTIONS:   

Section 185 of the Corporations Act Duty of care: ss 180, 189 and 190 of the Corporations Act Duty to avoid conflict of interest: ss 182, 183, 191, 194, 195, 208, 209-216, 228 and 229 of the Corporations Act

Ter mi nat i onbyper f or mance Ter mi nat i onbyper f or manceocc ur swhenacont r acti sdi sc har gedbecaus eal l par t s oft hecont r acthav ebeencompl et ed.Onemaj ori ss uewi t ht er mi nat i onby per f or mancei si dent i f yi ngwhenapar t yhasper f or medwhati sr equi r edundert he cont r act .Thebasi cr ul ef ort er mi nat i onordi sc har geofcont r actbyper f or mance,i s t hatt heper f or mancei sex pect edt obeex actandcompl et e.

Performance must be complete and exact before a party is paid

Cutter v Powell (1795)

Di schar get hr oughbr eachandf r ust r at i on Di schar gebybr each Thet er msofacont r actcanbedi vi dedi nt ocondi t i onsorwar r ant i es .Whent her e’ sabr eac h ofanagr eement ,t her emedi esav ai l abl ewi l ldependonwhet hert hepar t i cul arbr eac hoft he cont r act ual t er mi sacondi t i onorawar r ant y .So,whatdet er mi nesabr eachofcondi t i onor war r ant y ? Acondi t i oni sanessent i alt er m oft hecont r act .Br eachent i t l est hei nnocentpar t yt o t er mi nat et hecont r actand/ orsuef ordamages . Awar r ant yi sanonessent i alt er m oft hecont r act .Br eac honl yent i t l est hei nnocentpar t y t osuef ordamages. Termination for Delay in Performance- breach of an essential term

Tramways Advertising Pty Ltd v Luna Park (1938)

Di schar get hr oughf r ust r at i on supervening events provided no excuse for nonperformance

Paradine v Jane (1647)

Fr ust r at i ngev entoccur r i ngwi t houtt hef aul tofei t herpar t y Thedoct r i neoff r us t r at i onal l owsf oraut omat i cmut ual di schar geofacont r actwher ei t r equi r est hatt hef r us t r at i ngev entar i seswi t houtf aul tonei t hersi de.Thecondi t i onst obemet ar e:    

asuper v eni ngeventmus tcauseaf undament al orr adi cal changet ot henat ur eoft he cont r act ual r i ght s/ obl i gat i ons nei t herpar t yshoul dhav ecausedorbr oughtaboutt hesuper v eni ngevent t hesuper veni ngev entmus tnothavebeencont empl at edbyt hepar t i eswhent hey ent er edt hecont r act ,and i tmus tbeunj us tt ohol dt hepar t i est ot het er msor i gi nal l yagr eedupon.

Whatcanconst i t ut et her equi r ed‘ i mpossi bi l i t y’ ? Wher eapar t i cul art hi ngt hatf or mst hesubj ectmat t eroft hecont r actandt hecont i nued exi st enceofwhi chi ses sent i al t ot heper f or manceoft hatcont r actceasest oexi st .

Destruction of subject-matter -> defendant was not liable to pay

Taylor v Caldwell (1863)

Wher et heoccur r enceofaneventf or mst hev er ybasi soft hecont r actandt heeventdoes notoc curorf ai l st omat er i al i se.See:

Performance possible but futile because the entire purpose underlying the contract can no longer be achieved

Krell v Henry [1903] Codelfa Construction Pty Ltd v State Railway Authority of NSW (1982)

Fr ust r at i ondoesnotappl ywher eper f or mancei sst i l lpossi bl eevent houghi t ' smor e oner ous,i nconv eni entorexpensi ve.See:

a mere delay is not serious enough to frustrate a contract, unless the parties agree otherwise

Tsakiroglou and Co Ltd v Noblee and Thurl GmbH [1962] Davis Contractors Ltd v Fareham Urban District Council [1956]

Typesofr emedi es:Damages Remot enessofdamages Abr eachofcont r actmayl eadt ol os ses ,del ay sandcos t s .Thepar t yi nbr eac hcanonl ybe l i abl ef orl os st hati snott oor emot e.Thet es tofr emot enessi st hataper soncanonl ybe l i abl ef orl os st hat :  

ar i sesnat ur al l yf r om t hebr each( nat ur al l os s) ,or doesnotflownat ur al l yf r om t hebr eac h,butwhi chwasnev er t hel es scont empl at edby t hepar t i esatt het i met hecont r actwasmade( nomi nat edl os s) .

Damages are recoverable if: - Damages which may fairly and reasonably be considered as arising naturally from the breach - Damages which may reasonably be supposed to have been in the contemplation of the parties, as liable to result from the breach. Doctrine of remoteness

Hadley v Baxendale (1854)

Victoria Laundry (Windsor) Ltd v Newman [1949]

  

Shoul dt hecont r act i ngpar t i eshavef or es eent hedamages ? Whathappened? Whatwasact ual l yknownofpot ent i al l os ses ,andwhatcoul dpr act i cabl ybe f or eseen?

Assessi ngt heamount / measur eofdamages Theusual appr oachest oi dent i f yi ngt heamountorquant um ofdamagesar et he: 



r el i ancel ossappr oach—cal cul at edt ocompens at et hepl ai nt i fff orl os sesi ncur r edas ar esul toft hem havi ngr el i edupont heot herpar t yper f or mi ngt hei robl i gat i onsandt hei r f ai l ur et odoso;ot her wi se expect at i onl ossappr oach—usedi fr el i ancel ossi si nappr opr i at e

Compens at i oni sf oract uall oss—damagesar enotawar dedt opuni sht hepar t yi nbr each andi nsomeci r cumst ancesnomi naldamagesmaybeadequat e. Commonwealth of Australia v Amann Aviation Pty Ltd (1991) Thedi fficul t yi nquant i f yi ngt hedamagesi snobart or ecover y ,e. g.specul at i v eor pr ospect i v el os ses . Loss of chance: damages due to lost opportunity rather than a certainty that they would win

Chaplin v Hicks [1911] Howe v Teefy (1927) 27 SR (NSW)

Thesecas esar eexampl esofwhatoccur si fyoucan' tquant i f ydamagesspeci fical l y—i n par t i cul ar ,howwoul dy ouquant i f yspecul at i veorpr ospect i v el os ses ?

Nonpecuni ar yl osses Damagesar enotus ual l yr ecover abl ef ornonpecuni ar yl os ses ,i . e.nonquant i fiabl el os ses . Howev er ,t her ear esomeex cept i ons .Forex ampl e: i nj ur edf eel i ngs,di sappoi nt mentordi st r es s— Addis v Gramophone Co Ltd [1909] Damagesar er ecov er abl ef ordi s t r es sordi sappoi nt menti ft he Bal t i cShi ppi ngCovDi l l on( 1993) c ont acti sf orpl eas ur eorenj oy ment

i nconv eni enc eandannoy ance Jarvis Swans Tours Ltd [1972]

Thedut yt omi t i gat eandl i qui dat edchanges Thepar t ysuffer i ngabr eachhasadut yt omi t i gat et hei rl oss es( ormi ni mi set hem) .Fai l ur et o mi t i gat emayl es sent hepossi bl edamages ,ort hecour twi l lmak ei t sownas ses sment . Mi t i gat i oni saques t i onoff act ,andas ses sedbyacour t .Theonusofpr oofi sont he def endantt oshowt hatt hepl ai nt i ffdi dnott ak er easonabl est epst omi t i gat et hel os s.

Adi st i nct i onshoul dbemadebet weenl i qui dat edandunl i qui dat eddamages : 



Li qui dat eddamages:Anamount ,agr eedt obyt hepar t i esatt het i meofcont r act i ng, t obet hedamagespayabl ei nt heventofabr each.Forex ampl e,bui l di ngcont r act smay havesetpenal t i esf orl at ecompl et i on. Unl i qui dat eddamages:Anamountt hati snotpr edet er mi ned—i t ' scal cul at edt o r efl ectact ual l os st hatt hepl ai nt i ffhassuffer ed. Andrews v Australian New Zealand Banking Group Ltd [2012]

Thedi v i s i onofpower Unders .198A oft heCor por at i onsAct2001,i t ' scl eart hati t ' st heBoar dofDi r ect or swho havet hepowert omak emanagementandbusi nessdeci si ons,nott heshar ehol der s ( member s) . Theshar ehol der scanaskquest i onsandspeakatt heAnnual Gener al Meet i ng,hav et he r i ghtt ovot ef ort heel ec t i onofdi r ect or sandappr oveoft her emuner at i onr epor tf orex ec ut i v e di r ect or s . Shar ehol der smi ghtt hi nkt heyownt hecompanyandt hi nkt heyhavemor epower ,butt hey don’ t .

Companyasasepar at el egalent i t y Thepr i nc i pl et hatev enasmal lonemancompanywasasepar at el egal ent i t yf r om i t smai n shar ehol derandbusi nessmanager .Ev er ycompany ,howeversmal lorl ar ge,wasasepar at e l egal ent i t yofi t sown.

Salomon v Salomon & Co Ltd [1897] Lee v Lee’s Air Farming Ltd [1961] Macaura v Northern Assurance Co Ltd. [1925]

Li f t i ngt hev ei l ofi ncor por at i on Ther ecogni t i ont hatacompanyi sasepar at el egalent i t ydi s t i nctf r om i t s s har ehol der si sof t enr ef er r edt oast he' v ei lofi ncor por at i on' . Pi er ci ngorl i f t i ngt hecor por at ev ei lmeanst hatt hes epar at el egalper sonal i t yoft he companyi sdi s r egar dedi ncar ef ulci r cums t ances . Youcanl i f tt hecor por at ev ei l : 

byst at ut e: Di r ect or s’ l i abi l i t yf ori ns ol v entt r adi ng–s.588G Uncommer ci al t r ansact i ons–s.588FB Companyofficerchar ges–s.588FP Fi nanci al as si st ance–s .260D Tax at i onl egi sl at i on atcommonl aw: o f r aud o o o o o



o

av oi danceofl egal obl i gat i on.

Pr i vat ecompani es Pr opr i et ar y( orpr i v at e)compani esar eof t ensmal l compani es ,suc hasf ami l ycompani es . Thet ypesofcompani est hatcanbei ncor por at edaspr opr i et ar ycompani esar e:  

l i mi t edbyshar es unl i mi t edwi t hshar ecapi t al .

Publ i ccompani es Publ i ccompani esar egener al l yl ar gercompani esandar eus ual l yl i st edont heASX.The t ypesofcompani est hatcanbei ncor por at edaspubl i ccompani esar e:    

l i mi t edbyshar es l i mi t edbyguar ant ee unl i mi t edwi t hshar ecapi t al nol i abi l i t ycompani es .

Compani esl i mi t edbyshar es Accor di ngt os.9( Li nkst oanext er nal si t e. )oft heCor por at i onsAc t2001' acompanyl i mi t ed byshar esmeansacompanyf or medont hepr i nci pl eofhavi ngt hel i abi l i t yofi t smember s l i mi t edt ot heamount( i fany)unpai dont heshar esr espect i vel yhel dbyt hem'

Compani esl i mi t edbyguar ant ee Accor di ngt oFi t zpat r i cketal .( 2016,p.454) ,' acompanyl i mi t edbyguar ant eemeansa companyf or medont hepr i nc i pl eofhavi ngt hel i abi l i t yofi t smember sl i mi t edt ot he r es pec t i veamount st hatt hemember sunder t ak et ocont r i but et ot hepr oper t yoft hecompany i fi ti swoundup. '

Unl i mi t edcompani es I nunl i mi t edcompani es,member shavenol i mi tpl acedont hei rl i abi l i t y( s.9 )andar el i abl e t oanunl i mi t edext entonwi ndi ngupi ft hecompanyhasi ns uffici entass et st omeeti t sdebt s. I t ' ssi mi l art oapar t ner s hi p. Ot heri mpor t antpoi nt si ncl ude:    

Ther ear eot heradvant agesf ori ncor por at i on. I t ' sunsui t abl ef orat r adi ngcompany . Ther ear ear ound600unl i mi t edcompani es . Sui t abl epr of essi onal r ul espr ohi bi tl i mi t edl i abi l i t y ,suchasl egal andaccount i ng fir ms .

Nol i abi l i t ycompani es Anol i abi l i t ycompanymeansonet hati sr egi st er edas,orconver t st o,anol i abi l i t ycompany Acompanymayber egi st er edasanol i abi l i t ycompanyonl yi f : unders.9.'  

t hecompanyhasashar ecapi t al ,and t hecompany’ sconst i t ut i onst at est hati t ssol eobj ect sar emi ni ngpur poses,and



t hecompanyhasnocont r act ual r i ghtunderi t sconst i t ut i ont or ecov ercal l smadeon i t sshar esf r om ashar ehol derwhof ai l st opayt hem. ’ ( s .112) .

Ot heri mpor t antpoi nt si ncl ude:    

Anol i abi l i t ycompanymus tnotengagei nact i vi t i est hatar eout si dei t smi ni ng pur pos esobj ect s . Thecompanyhasnol i abi l i t yt opaycal l s( s . 254M ) . For f ei t ur eandsal eofshar esf orf ai l ur et omeetcal l ( s .254Q ) . Ther ear ear ound1000nol i abi l i t ycompani es .

s .148 r equi r esanol i abi l i t ycompanyt ohavet hewor d‘ NoLi abi l i t y’( or‘ NL ’ )aspar tofi t s s . 156) . nameandonl yanol i abi l i t ycompanycanuset hesewor dsi nt hei rname(

Di st i nct i on–Publ i candpr i v at ecompani es

Thecompanyconst i t ut i onandr epl aceabl er ul es( RRs ) I ni t i al l yanAust r al i ancompanyhadt osubmi tawr i t t encons t i t ut i onwhenappl yi ngf or r egi st r at i on.I nor dert oachi evegr eat eruni f or mi t yandi mpr ov ement si nst andar dsof

gover nance,t heCor por at i onsAc t2001nowdefinesasetofdef aul ti nt er nal gov er nance s .134) .Theser ul esar ecal l ed‘ r epl aceabl er ul es ’ andar esetouti ns.141oft heAct . r ul es( Theser ul esmak et her equi r ementf oraconst i t ut i onf ornewcompani esobsol et e.Somear e mandat or y ,someonl yappl yt opubl i ccompani esandsomeonl yappl yt opr i v at ecompani es . Mos tr ul es ,howev er ,canber epl aced,t her ebyal l owi ngacompanyt odev el opi t sown const i t ut i onbasedont hedef aul tr ul es( s .135) .

Legalcapaci t yandpower sofac ompany  



Ass .124 st at es,‘ Acompanyhast hel egalcapac i t yandpower sofan i ndi vi dual ’ :abol i t i onoft hedoct r i neoful t r avi r esandt her equi r ement sofobj ect scl ause. Ass .125 st at es ,‘ Anac toft hecompanyi snoti nval i dmer el ybecausei ti scont r ar y t oorbey ondanyobj ect si nt hecompany ’ sconst i t ut i on’ .Ther emayst i l l beabr eac hof di r ect or ’ sdut y . Ass .232 st at es ,t her ecoul dbea' cour tor deri ft hecompany’ saffai r sar econt r ar yt o t hei nt er est soft hemember sasawhol eoroppr es si vet o,unf ai r l ypr ej udi ci al t o,or unf ai r l ydi scr i mi nat or yagai ns t ,amemberormember s.

Effectofconst i t ut i onandr epl aceabl er ul es Ass .140 st at es,' Acompany’ sconst i t ut i on( i fany)andanyr epl aceabl er ul est hatappl yt o t hecompanyhavet heeffectasacont r actbet ween: 

t hecompanyandeachmember the internal governance (s140) rules do not operate as a contractbetween a member and an officer, or between an officer and another officer. Thecontract cannot be enforced by outsiders. The court held that Forbes had no right to challenge the conduct of the company because he was not actually a member of the company. Only members can uphold their rights according to the rules in a constitution.

s140

Eley v Positive Government Security Life Assurance Co (1875)

Forbes v NSW trotting Club Ltd [1977]

Hickman v Kent or Romney Marsh Sheepbreeders Assoc [1915]

Shuttleworth v Cox Bros & Co (Maidenhead) Ltd [1927] 

t hecompanyandeachdi r ect orandcompanysec r et ar y



amemberandeachot hermember . ' Re Caratti Holding Co Pty Ltd [1975]

Theal t er at i onoft heconst i t ut i onandr epl aceabl er ul es Ref ert ot hef ol l owi ngsect i onsoft heCor por at i onsAc t2001i nr el at i ont ot heal t er at i onoft he const i t ut i onandr epl aceabl er ul es :    

s .135( 2) acompanymaydi spl aceormodi f yanyoneormor eoft her epl ac eabl e r ul esbyadopt i ngaconst i t ut i on. s . 136( 1) ( b) acompanycanadoptaconst i t ut i onbyspeci al r esol ut i on. s .136( 2)acompanycanmodi f yorr epeal aconst i t ut i onbyspeci alr esol ut i on s .9 Speci al r es ol ut i on: o not i ce–21days( s .249H( 1)) o passedbyatl east75% oft hevot escas tbymember sent i t l edt ov ot eont he r es ol ut i on o l odgeacopyr esol ut i onmodi f yi ngconst i t ut i onwi t hASI Cs .136( 5).

Whohasaut hor i t yt oactf oracompany ? Aper sonhasaut hor i t yt oactf oracompanyi fsheorhehasbeengi v enact ualorappar ent aut hor i t y .

Act ualaut hor i t y Act ual aut hor i t yi swher et hepr i nci palhasact ual l yagr eedt hatt heagentcanactont he pr i nci pal ’ sbehal f .Thi scanbeexpr ess edori mpl i ed. 



Expr essaut hor i t ycanar i sef r om apr ovi si oni nt heCor por at i onsActort he company’ sconst i t ut i on( e. g.s.198A) .Expr es saut hor i t ycanal soar i sewhenacompany agent( e. g.t heboar d)whohasact ualaut hor i t ydel egat essomeoft hei rownac t ual aut hor i t y . I mpl i edact ualaut hor i t ycanar i sebyi mpl i cat i onf r om t hi ngst hepr i nci palsaysand does( e. g.appoi nt i ngsomeonet oacer t ai nposi t i on) .Di ffer entcompanyofficer shav e di ffer entl ev el sofi mpl i edaut hor i t y( basedont hei rr ol ei nt hebusi ness) .Peopl ewho havei mpl i edaut hor i t yar eout l i nedi nt hef ol l owi ngt abl e.

Appar entaut hor i t y I saut hor i t yal waysexpl i ci t l ygr ant ed?Whati facompanyofficeri spr es ent edbyt hecompany i nawayt hatmak est hem appeart ohav eaut hor i t y ? Appar entaut hor i t ycanar i seev enwher et hepr i nc i palhasnoti nanyway( wor dsorconduct ) agr eedt hatt heagentcanactont hepr i nc i pal ’ sbehal f .Ther ear et hr eer equi r ement s( at commonl aw)t hatmus tbesat i sfied:   

Ther emustbea' hol di ngout ' ( or' r epr esent at i on' ) —canbebywor dsoract i onsor mayal sobebyacqui escenc e. I tmus tbebysomeonewi t hact ualorr eal aut hor i t y—appar entaut hor i t yi snot enough.Aper sonwi t houtaut hor i t ycannotconf eraut hor i t yont hemsel v es . Anout si deri sent i t l edt or el yont heaut hor i t yofagent spr es ent edi nt hi smanner .The out si dermustbe' i nduced' . Freeman and Lockyer v Buckhurst

Park Properties (Mangal) Ltd [1964]

Whatcanout si der sdo? Aper sondeal i ngwi t hacompanyi sent i t l edt omak ecer t ai nass umpt i onsofr egul ar i t yi n r el at i ont ot hosedeal i ngs.Theseas sumpt i onsar ei nt endedt opr ot ectout si der swhodeal i n goodf ai t hwi t hper sonswhocanr eas onabl ybeexpect edt ohav eaut hor i t yt oactf ort he company . Royal British Bank v Turquand (1856) I nsummar y ,anout si derwhocont r act swi t ht hecompanyi ngoodf ai t hmayass umet hatt he companyi sact i ngwi t hi ni t sconst i t ut i on.Theout si deri snotboundt oi nqui r ewhet heract sof i nt er nal managementhav ebeenmade( e. g.compl yi ngwi t hi nt er nal r esol ut i ons) .Thi si s cal l edt he‘ i ndoormanagementr ul e’ .

I ndoormanagementr ul e Thei ndoormanagementr ul ei snowcodi fiedi ns .129 oft heCor por at i onsAct 2001.I tst at est hatt heout si dercanass umet hat :   

t her ear enopr ocedur al def ect si nt heappoi nt mentofdi r ect or s boar dmeet i ngshav ebeenpr oper l ycal l edandhel d anyboar dorgener al meet i ngappr ov al r equi r edunderconst i t ut i on/ r epl aceabl er ul es hasbeenobt ai ned.

Howev er ,t heypr obabl ycannotass umet hatasi ngl edi r ect orhasbeenappoi nt ed CEO,asar epr esent at i oni sr equi r ed. Thei ndoormanagementr ul ecannotber el i edoni ft hef ol l owi ngocc ur s:  

Theout si derhasact ual knowl edge. ' Putoni nqui r y' ex cept i on: o Hast heout si derf ai l edt omak ei nqui r i est hatwoul dus ual l ybemadeby someonei nt hei rposi t i on? o Woul dar easonabl eper s oni nt heout si der ’ sposi t i onhavebeenputoni nqui r y andi nv est i gat ed?

Thi scas ei sanex cept i ont oTur quandsRul eandt heas sumpt i onsi ns .129 Northside Developments Pty Ltd v Registrar-General (1990)

Di r ect or s'dut i es s .181oft heCor por at i onsAct2001st at est hat :' Adi r ect ororot herofficerofacor por at i on mus tex er ci sehi sorherpower sanddi schar gehi sorherdut i esi ngoodf ai t h,i nt hebest i nt er est soft hecor por at i onf orapr operpur pose' s .181 oft heCor por at i onsAc t2001,ev eni fadi r ect or ' sact i onsar ei nt hecompany’ sbest er ci sedf orapr operpur pos e. i nt er est s ,t her ewi l l st i l lbeabr eachofdut yi fapoweri snotex

Howard Smith v Ampol Petroleum [1974] s.182 oft heCor por at i onsAct2001,di r ect or s,officer sorempl oy eescannotus et hei r posi t i ont ogai nadvant agef ort hems el vest hr oughconduc tt hati si ncons i st entwi t ht he pr operdi schar geoft hei rdut i es .Di r ect or shav eafiduci ar ydut ynott opl ac et hemsel v esi na posi t i onwher et her e' sanact ual orsubst ant i al possi bi l i t yofconfli ctbet weenaper sonal i nt er estandt hedi r ect or ’ sdut yt oacti nt hei nt er est soft hecompany .Thi si sav er yst r i ctdut y desi gnedt opr ot ectshar ehol der s. Furs Ltd v Tomkies (1936)

secret profit was made. Breach of fiduciary duty. Conflict of interest

Regal Hastings Ltd. v Gulliver [1942]

St at ut or ydut yt oav oi dc onfl i ctofi nt er es t Di scl os...