TUTORIAL PAPER NO 6

Question 1

Ajax Pty Ltd is a small company that sells computers and other electronic equipment.
Its majority shareholder is Alan. The minority shareholder is Alan’s wife Mavis. The
two directors are Alan and Betty, his sister. Alan was the Managing Director and
Betty was the Company Secretary.

Part A

Betty signed a contract for the rental of a car for a period of one month. She did not
inform the company of the contract and she allowed her daughter to use the car for
the entire month. The contract with the rental car firm was signed as “Betty,
Company Secretary on behalf of Ajax Pty Ltd”. The rental bill came up to $3,000.
When Alan found out he threatened to “throw the book” at Betty.

Discuss whether the contract is binding on Ajax and what action may be taken by the
Ajax against Betty.

Part B

Alan approached a long-term client of the company for new business. The customer
wanted to purchase 200 computers from Ajax. The Managing Director informed the
customer that he could arrange for a better price from ABC Pty Ltd. This resulted in
ABC Pty Ltd making a profit of $5,000. It turns out that ABC Pty Ltd is solely-owned
by Alan. When Betty found out about the secret profit, she did not tell anyone and
does not plan to pursue any action on Ajax’s behalf.

Discuss Alan’s liability for the above action and how the claims may be instituted.

Question 2

Identify whether a trust has been created in the following situation, and if so specify:
(i) the type of trust; (ii) the trustee; (iii) the beneficiary; and, (iv) trust property.

Peggy Sue and Buddy lived together for six years and pooled their resources
to acquire land, build a house, and later pay the maintenance and taxes on
the house. The title to the property was registered to Peggy Sue. Buddy
contributed $25,000 of the initial purchase and building price of $100,000 with
Peggy Sue contributing the other $75,000. When Buddy moved out, Peggy
Sue claimed the house was her exclusive property and that Buddy's
contributions were gifts to her.

Would your answer change if instead of living together “as a couple” their
relationship
was as daughter and father.