Enterprise Law - John, Kay and Tom Case Study - Law Assignment Help

Assignment Task

QUESTION ONE

 John, Kay and Tom, recent business graduates from Eastern Sydney University set up an accounting and financial services practice, Red Brick Road. They decided to formalise their business arrangement preparing a document called “The Business Agreement”. As per the business agreement, they each provide various accounting and financial services advice to clients and co-own the assets of the business as well as share profits and losses. After a few months, they took out a business loan from Tara, their close acquaintance.

The loan agreement provides Tara to receive a share of the profits as part of her loan agreement which is in writing. John and Tom contributed $50,000 to the partnership, while Kay put in $20,000. Kay has no assets outside of the partnership while John and Tom have substantial other assets outside the partnership. Kay, specialises in providing investment advice, while John and Tom do most of the accounting work for the firm’s clients. Kay is approached for investment advice by Mr Black, a retiree. Kay convinces Mr Black to invest in Fusion Ltd a newly formed investment company.

Kay assures Mr Black of Fusion ’s financial standing noting that her husband was the managing director of the company. Mr Black invests $200,000 in Fusion Ltd. It subsequently transpired that Fusion Ltd was a two dollar company with no assets and it went into liquidation shortly after Mr Black invested his money. In addition to the above, Kay who regards herself as knowing it all, orders in writing, using the firm's letterhead, 5 photocopy machines at $800 each as well as computer equipment worth $2000 from Tech Wizards Pty Ltd.

Due to a recent experience with a previous deal she had struck with a supplier, she has been forbidden by her partners under the terms of the Business Agreement from making any further orders for the firm. However, this time Kay thinks it will be different and believes her partners will approve her actions.

When the machines and equipment are delivered, John and Tom immediately send an email to Tech Wizards Pty Ltd advising them that as Kay had no authority to enter into the contracts, the business refuses to accept them. In the interim, John and Tom have since discovered that Kay has set up her own business (with a similar business model as the current business) and that she had been using some of the photocopy machines and computer equipment for her own business.

Kay has since left for a business trip to Bermuda and was never seen again. Please answer the following questions in the IRAC format, using relevant sections of the Partnership Act 1892 (NSW) and case-law:

(a) Advise whether there is a partnership in existence. Further, please advise if Tara is a partner of the business.

(b) Advise Mr Black as to what rights he has against the business as well as John and Tom in respect of the losses he has suffered.

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