ACCA F4 (MYS) JUNE 2008 ANS

Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Answers

Fundamentals Level –Skills Module, Paper F4 (MYS)Corporate and Business Law (Malaysia)June 2008 Answers1

This question tests the candidates’ knowledge of the advantages and operation of the doctrine of binding judicial precedent inMalaysia.

(a)

The doctrine of binding judicial precedent is a doctrine which requires decisions of higher courts to be followed by courtswhich are lower in the hierarchy of the court structure.It must be noted that it is actually the

ratio decidendi

that binds future courts. The

ratio decidendi

refers to the rationale orprinciple of law on which the decision is based. The

ratio decidendi

must be distinguished from

obiter dicta

, which refers toopinions or other matters expressed by the judge, which are not directly relevant to the case before him.In order to better understand the operation of the doctrine, the hierarchy of the courts must be borne in mind. The FederalCourt is the highest court in Malaysia. Below it is the Court of Appeal. Below the Court of Appeal is the High Court. Belowthe High Court are the lower courts comprising the Sessions Courts, Magistrates’ Courts and the Penghulu’s Courts, whichare referred to as the Subordinate Courts.The doctrine operates as follows:(i)Decisions of the Privy Council (which was formerly the highest court of appeal for Malaysia) given on appeal fromMalaysia or from another Commonwealth country where the law is in

pari materia

to Malaysia are binding on theMalaysian courts. See:

Khalid Panjang and Ors

[1964] MLJ 108.

D.G.I.R.

Kulim Rubber Plantation Ltd

[1981]1 MLJ 214.(ii)Decisions of the Federal Court (the highest court in Malaysia) are binding on all courts below it. In the same way as theHouse of Lords of England is not bound by its own decisions, the Federal Court is also not bound by its own decisionsand may depart from them. See:

Arulpragasan

Public Prosecutor

[1997] 1 MLJ 1. However, this will only be sparinglydone. See:

Tunde Apatria

Public Prosecutor

[2001] 1 MLJ 259.(iii)Decisions of the Court of Appeal will be binding on all the courts below it. As this court’s position is analogous to theCourt of Appeal of England, it is bound by its own previous decisions to the same extent as the latter. See:

Young

Bristol Aeroplane Co Ltd

[1944] K.B. 718.(iv)Decisions of the High Court are binding on all Subordinate Courts, but one High Court judge is not bound to follow thedecision of another. See:

Sundralingam

Ramanathan Chettiar

[1967] 2 MLJ 211.Subordinate Courts are bound by precedents laid down by the Superior Courts but their own decisions do not bind any court.

(b)

The advantages of the doctrine of judicial precedent are the following:(i)It helps to achieve certainty and uniformity in the law as like cases will be treated alike.(ii)The law developed through the cases is more practical as it is based on actual situations rather than on hypotheticalones.(iii)Flexibility in the application can also be achieved. Although judges of the lower courts are generally bound by thedecisions of the higher courts, they do not always have to be so. For example, a judge may avoid following an earlierprecedent if the case was decided ‘

per incurium

’ i.e. without taking into account a relevant legal principle or statute. Hecould also avoid it by distinguishing the precedent from the facts of the present case. This flexibility allows the law tobe adapted to the changing needs of society.

This question, on agency law, tests the candidates’ knowledge on the duties of an agent towards his principal under the ContractsAct 1950. Candidates are only required to explain any FIVE such duties.The Contracts Act 1950 imposes several duties upon an agent towards his principal. These may be explained as follows:(a)Section 164 imposes a duty upon an agent to obey the principal’s instructions or, in the absence of such instructions, to actaccording to the custom which prevails in doing business of the same kind at the place where the agent conducts thebusiness. When the agent acts otherwise, he must make good any losses or account to the principal for any profits made byhim.(b)Section 165 imposes upon the agent a duty to exercise care and diligence in carrying out his work and to use such skill ashe possesses.The agent is expected to conduct the business of the agency with as much skill as is generally possessed by persons engagedin similar business unless the principal has notice of his lack of skill. He will have to compensate the principal for theconsequences of his own neglect, want of skill or misconduct.(c)Section 166 imposes upon the agent a duty to render proper accounts when required. The agent has a duty to account forall the monies and property handled by him. Such accounts must be produced by the agent when demanded by the principal.(d)Section 167 imposes upon the agent a duty, in cases of difficulty, to use all reasonable diligence in communicating with hisprincipal and in seeking to obtain his instructions.

(e)Section 168 imposes upon the agent a duty to act solely for the benefit of his principal. If he deals on his own account inthe business of the agency without the consent of the principal, the principal has a right to repudiate the transaction. Further,by s.169 the principal also has the right to claim from the agent any benefit received by him from the transaction.(f)Section 171 imposes upon the agent a duty to pay to the principal all sums received on his behalf. This duty is, however, byvirtue of s.170, subject to the right of the agent to retain or deduct from such sums received, advances made or expensesincurred by him in carrying out his duty, commission and other remuneration payable to him for acting as agent. Further,s.174 allows him to retain his principal’s property in his possession until his remuneration is paid.(g)The agent also has a duty not to make a secret profit out of his position as agent. Secret profit refers to a bribe or other financialadvantage obtained by the agent in the course of carrying out his duties, without the knowledge of the principal. When theprincipal discovers it, he may recover the secret profit from the agent. He may also repudiate the transaction concerned:ss.168 and 169.

This question, which contains two parts, tests the candidates’ knowledge on the meaning of a contract of service in the context of employment law and the right of employees to be involved in a trade union, under the Employment Act 1955.

(a)

A contract of service is basically a contract between an employer and an employee under which the employee agrees to workfor the employer. The Employment Act 1955 defines a contract of service as, ‘any agreement whether oral or in writing andwhether express or implied, whereby one person agrees to employ another as his employee and that other agrees to servehis employer as employee and includes an apprenticeship contract’.The Industrial Relations Act 1967 also defines such a contract but refers to it as a ‘contract of employment’. Under this Act,a ‘contract of employment’ is defined as, ‘any agreement whether oral or in writing and whether express or implied wherebyone person agrees to employ another as a workman and that other agrees to serve his employer as a workman’.Despite the differences in wording, it has generally been accepted that there is no distinction between the two phrases.See:

American International Assurance Co Ltd

and

Dato Lam Peng Chong & Others

(Award 275 of 1988).

(b) (i)

The Employment Act 1955 requires contracts of service exceeding one month to be in writing. This is evident froms.10(1) which states as follows:‘A contract of service for a specific period of time exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month, shall be inwriting.’Thus, only contracts of service for a period of only one month or less can be made orally. Others must be in writing.

(ii)

Further, an employer cannot restrict an employee from being involved in a trade union or trade union-related activities.This is provided for in s.8 as follows:‘Nothing in any contract of service shall in any manner restrict the right of any employee who is a party to such contract:(i)to join a registered trade union;(ii)to participate in the activities of a registered trade union, whether as an officer of such union or otherwise; or(iii)to associate with any other persons for the purpose of organising a trade union in accordance with the Trade UnionsAct 1959.’

This question tests the candidates’ knowledge of the ‘veil of incorporation’ in company law as well as the situations where that veilmay be lifted. (Candidates are only required to discuss any FIVE instances of lifting the veil of incorporation.)

(a)

The ‘veil of incorporation’ refers to the legal phenomenon that upon the incorporation of the company it becomes in law aseparate legal entity distinct and separate from the members. The company is regarded as an artificial legal person having itsown rights, duties and liabilities. For example, the company has power to hold land and to sue and be sued in its own name.It also enjoys perpetual succession (unlike the partnership) and in the case of a limited company its members enjoy limitedliability in the sense that their liability to contribute to the assets of the company in the event of a liquidation is limited to theamount, if any, unpaid on their shares. See:

Salomon

Salomon & Co Ltd

[1897] AC 22; s.16(5) Companies Act 1965.

(b)

Although the company is a separate legal entity, there are a number of circumstances where the courts are prepared to departfrom this principle. This is often referred to as the lifting of the veil of incorporation. Such lifting of the veil of incorporationmay occur either by virtue of a statutory provision or by established case law. The following are the main circumstances:Under Statute:(i)Section 36 Companies Act 1965By this section where the number of members of a company falls to one and the sole remaining member knowinglycarries on business for a period longer than six months, he will be personally liable for the debts incurred after the firstsix months.

of 00

Category:	Business/Law > Taxes & Accounting
Rating:	(1 Rating)
Upload Date:	01/30/2009
Copyright:	Attribution Non-commercial
Tags:	Accounting Accounting (fewer)

Documents

People