Question 1 (10 marks)
Kruger is Heavy Machinery Sales Manager of JCI. He has frequently negotiated and signed contracts on behalf of JCI with Oppenheimer, Managing Director of Anglo-American Corporation Ltd. Kruger and Oppenheimer have been in negotiations over the supply of an ore smelter by JCI to Anglo-American. On Friday 5 July at 10.00 am Kruger phones Oppenheimer and says “We will sell you the ore smelter for $ 3.5 million. I’ll be at your office at 3pm to sign the contract.” At 1 pm, Oppenheimer is having lunch at the Rand Club with Rhodes, who is another executive of JCI. During the lunch Rhodes says “Things are awful at JCI. Kruger has been making too many mistakes this year, his department hasn’t been trading profitably, and I heard he was going to get a nasty surprise at our lunchtime Board meeting. Frankly, I can’t see him surviving”.
Oppenheimer goes back to his office and mentions the lunchtime conversation to Jameson, a fellow Anglo-American executive, saying that he (Oppenheimer) is very concerned and thinks that Kruger may have been ousted. Jameson says "Look, we're getting a good deal here, don't worry about what is going on at JCI". At 3pm Kruger arrives and signs the deal to sell the machinery to Anglo American for $ 3.5 million. However on Monday the Financial News carries an article headed “JCI Heavy Machinery Sales Manager Fired at Board Meeting Last Friday”. Anglo American has tendered a cheque to JCI for $ 3.5 million, and has demanded delivery of the smelter, but JCI refuses to sell it, saying that Kruger had no authority to sell the smelter because he had been fired at 1.30pm and had acted out of spite when he signed the deal in order to make trouble for JCI. Assume that all the above facts are provable in a court. Advise JCI as to their legal position, citing statutory and case law authority.
Question 2 (10 marks)
Mary and Sara are sisters who established partnership with their brothers, Sam, Jeff and John which sold interior decorating supplies. After running the partnership for five years, they decide to incorporate the business. They register a company called Interior Solutions Pty Ltd. Each sibling has a 20% shareholding. All five siblings are also named as directors of the company. The constitution of the company requires that each director circulates to all the others a report of their activities every three months.
After a year of operating, relationships between the directors break down. Mary and Sara discovered that Sam used $ 10 000 of company funds to take an overseas trip, and that he also plans to use company funds to buy a car for his wife in a month’s time. Neither Sam nor Jeff have circulated reports over the past six months. Mary and Sara have also discovered that Sam, Jeff and John have been holding meetings without informing them, at which they have taken decisions relating to the operation of the company. When they confronted their brothers about these issues at a board meeting, the brothers said that they didn’t care what the sisters thought, and that they would run the company as they saw fit. The brothers also used their voting power to defeat a motion by Mary and Sara that the company should initiate action against John to recover the $ 10 000. Assume you are a solicitor who Mary and Sara have consulted. Advise them as to what specific remedies they are entitled to, citing full statutory and case law authority.
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