Legal Issues Arising from Louis Litt's Actions
Louis Litt commenced employment on 1 February 2010 within the national investment advisory firm, Donna Paulsen & Associates (DPA), which is solely owned by Donna Paulsen of 123 Wall Street, Brisbane, Qld, 4000. Louis is a leading technology expert and was responsible for all technology infrastructures for DPA’s 250 offices across Australia. His work included managing the acquisition of computing and communications hardware and software and associated services from suppliers. Louis had authority to approve technology expenditure up to a limit of $800,000, although he had capacity to exercise influence over the outlay of a far greater amount of expenditure than that.
Louis acquired goods and services for DPA from Advisory Technology Supplies Pty Ltd (ATS), a private company controlled by Jessica Pearson (she was the sole director and sole shareholder of ATS). On 1 May 2016 Louis telephoned Gretchen, Jessica Pearson’s personal assistant and said “I’m about to spend a lot of money with ATS. Do you think Jessica would give me $300,000 cash?” Louis also told Gretchen that Jessica should communicate with him on this topic at his private hotmail email address ([email protected]) and not at his DPA email address. When Gretchen relayed this message from Louis to Jessica, Jessica said “Thanks, don’t tell anyone. I’ll look after it.”
On 30 May 2016 Louis gave four weeks’ notice of his resignation to ATS and his last working day was agreed to be 27 June 2016. On 1 June 2016 Louis issued an invoice in the name of LL Business Solutions (LLBS) to ATS in the amount of $300,000. LLBS had been registered as a business name by Louis in December 2009 and he continues to be the sole owner of LLBS. ATS paid the LLBS invoice in full on 25 June 2016. Neither Louis nor LLBS provided any goods or services to ATS for payment of the invoice. On 26 June 2016 Louis approved expenditure by DPA for the purchase of equipment from ATS at a cost of $750,000, which ATS installed in several of DPA’s CBD offices. Donna has just discovered that this equipment had a market value of $250,000. ATS was wound up and deregistered in June 2017.
Coincidentally, also on 1 February 2010, Donna’s mother, Edith Paulson appointed her brother, Daniel Paulson to be her attorney under a valid Queensland enduring power of attorney. The enduring power of attorney became operative in March 2010 when Edith lost capacity.
The enduring power of attorney gave Daniel authority to act on Edith’s behalf in relation to her financial affairs, despite her incapacity. After Edith moved into a nursing home in April 2010, exercising his powers under the enduring power of attorney, Daniel sold Edith’s home, her only asset, for $500,000. When he received the sale proceeds on 30 April 2010, Daniel deposited $250,000 into a bank account in Edith’s name with NY Bank, and gave the remaining $250,000 to his (Daniel’s) son, Harold Paulson for Harold to use to purchase a house in Clayfield (the purchase price was $250,000).
Daniel had a modest income, their family had always only just been able to make ends meet, and never owned their own home, so he wanted life to be easier for Harold. Daniel was also very grateful to Harold because Harold would sometimes help Daniel with running errands for Edith and managing her affairs, including collecting Edith’s mail and depositing cheques into Edith’s account. Harold even helped Daniel get Edith’s house ready for sale and move Edith’s remaining furniture out once the house sold. Harold has renovated the Clayfield house and it is now worth $750,000. Edith died on 31 July 2017. Donna is the executor and sole beneficiary under Edith’s valid will.
Donna has asked your supervising partner, Rachel Zane for advice as to whether she, or DPA, have any claims against any parties arising out of these circumstances, the prospects of success and if successful, what relief may be available to her or DPA.
Rachel has requested that you prepare a letter of advice for Donna and DPA and a supporting memorandum for her to review. If you need any further information or documents from Donna or DPA you should specify this and set out why this information is important.
You should only advise in relation to potential claims from your studies in equity and trusts (ie. do not advise in relation to claims in other areas of the law, for example negligence, contract, corporations law, consumer law or succession law).
Louis Litt facilitated a trade where you managed to use $ 750,000 to buy products whose market value was $ 250,000. These products were bought from ATS, which is a company that had links with Louis. In fact, the company paid Louis $ 300,000 for services that were not offered. Unfortunately, ATS managed to close down at the end of June 2016.
Another case is on Daniel Paulsen. He has the power of attorney over the assets of your mother. Nonetheless, he sold your mother’s house for $ 500,000, and gave $ 250,000 to his son Harold, who went on to buy a house and renovate it, which now costs $ 250,000.
Basing on the facts that are identified in this case, there are a number of legal issues that you need to consider, for you to successfully bring a case in court. The following are some of the issues that should be under consideration:
- Whether the transaction ordered by Louis Litt was an act of unconscionable transaction.
- Whether Louis Litt can be held liable for the transaction.
- Whether you can hold Jessica Pearson for the transaction.
- Whether you can recover the $ 250,000 that your uncle gave to his son Harold, after selling the house belonging to your mother.
In this case, Louis Litt had extensive influence over the financial affairs of DPA, the company that is managed and owned by Donna, and ATS, where Louis was also an employee. One of the laws that can be used for purposes of addressing the abnormal profits that was made by ATS through the misrepresentation of the prices of software is the 2010 Competition and Consumer Act. Subsection 20 (1) of the act is very clear on issues touching on the misrepresentation of prices. According to this subsection of the act, the law denotes that no person should engage in any unconscionable actions or behavior while engaging in commerce or trade.
Section 21 (1) of the Consumer act further prohibits the engagement of unconscionable trade by business organizations that supply products and goods to other organizations. Moreover, a similar case that can be used to examine the liability of Louis Litt and ATS is on Australian Consumer Commission v Lux Distributors Pty. In this case, the court ruled that it is unacceptable for an individual to use their influence for purposes of convincing another party to buy a product; thus, the plaintiff can seek remedies if the product bought has been misrepresented.
Regarding the position she has on her inheritance, one of the laws that can be used for purposes of determining whether she should claim for a revocation was established in the leading case of Strong v Bird. In this case, the principle established is that, if a testator has gifted a person who is the executor of his will, the principles of equity will hold that gift to be valid. For this rule to hold in a court of law, the testator must have had the intention of ensuring that the gift is irrevocable and immediate. This was the intention of Edith your mother.
By making you the executor as well as the beneficiary of the will, she had the intention of ensuring that you access the gifts immediately, and the process to be irrevocable (Posner, 2014). On this note, Harold will have to return back the $ 250,000 given by his uncle, and this is because the uncle violated his power of attorney by acting on his interests and not that of Edith. Note that, the traditional remedies for issues touching on equity and trust has been damages. For instance, the principles of equity have a notion or a maxim that denotes that any wrong must be followed by a remedy (Pettit, 2012). Damages are a remedial function that reflects the principles of equity. Nonetheless, the Judicature Act of 1875 provides a number of equitable remedies that you can claim. These remedies include rescissions, an account of profits, declarations, specific restitutions and imposition of a constructive trust (Watt, 2013). Nevertheless, you can always claim for a rescission as a remedy for the unconscionable act that Louis did for you.
Legal Issues Arising from Daniel Paulson's Actions
Note that, it is because of the advice of Louis, that you agreed to buy the software and supplies from ATS for $750,000. This is despite the market value for the products being $ 250,000. A rescission can be sought for purposes of ordering the revocation of the contractual obligation or relationship between Donna and Louis. One of the cases that have set up this principle of rescission is Alati v Kruger. In this case, the court was of the opinion that it is possible for the plaintiff to claim rescission, and this is in case there was a misrepresentation of facts, or a breach of contractual obligations.
Finally, you can claim full rescission, in the case involving you and Harold. Daniel did not have the authority to give $ 250,000 to his son Harold, since it was not the interest of Edith, the mother of Donna. Daniel was acting on the interest of his son and that of himself. Moreover, when it came to your contractual relationship with Louis and ATS, you cannot successfully claim for a rescission, because the company ATS has already been closed. This is a principle that is established in Clark v Dickson.
As per your instruction, you sought to seek an advice on the possible claims that you may have against Louis Litt, ATS and Harold Paulson. Some of the major issues that arise out of your case are:
Whether it is fraud or misrepresentation on the prices of software that were supplied to you by ATS. The market value for the software was $ 250,000, yet the amount of money that you used for the software was $ 750,000.
What sought of remedy you can claim for the misrepresentation of the prices for the products.
Whether there is a claim against Daniel Paulson and his son Harold, for unauthorized use of $ 250,000.
Before having an understanding on the relevant claims that you can bring against the people mentioned, there is a need of understanding various aspects of law, that emanate from their relationship with you, and the applicable laws that you can use to bring a claim against them. Take for example the case of Louis Litt and ATS. By selling for you softwares at $ 750,000, yet the market value for these softwares is $ 250,000, we can assert that an element of fraud and misrepresentation occurs.
Louis had an influence over the purchases and supplies, and he receiving about $ 300,000 from ATS without providing any services, it is possible to assert that the money was used to influence the contract. It is based on these facts that we bring up the concept of unconscionable conduct, and why it is against the law. Note that, a business transaction can be considered as unconscionable, if it is harsh and beyond the commercial bargaining and value that one of the parties to the transaction might get. In this case, you have suffered greatly, because of the great amount of money you have lost, due to the unfair value or purchase price of the supplies you got from ATS.
Remedies Available for Unconscionable Actions
The supplies coasted you $ 750, 000, yet the actual value of the supplies is $ 250,000. This means that you lost about $ 500,000, which is a significant amount of money. Basing on these facts, it is possible to assert that the transaction was unconscionable, and you can successfully seek a claim under the common law doctrines of equity. One of the laws that you can use for purposes of laying a claim against Louis is Competition and Consumer Act of 2010 s 20 (1).
According to this law, it is prohibited for a person to engage in trade or commerce by behaving in an unconscionable manner. It is this law that Louis Litt managed to breach and this is because he used his influence to order for softwares and supplies whose market value was $ 250,000, but he actually allowed the company to pay $ 750,000. This is unacceptable and uncalled for. Under the common law doctrines of equity, you can claim for a partial rescission. However, that is $ 500,000 against ATS. Nevertheless, it is unfortunate that ATS has been closed, thus you cannot claim for a rescission from the company, and this is based on the principles established in Clark v Dickson.
Note that, the principle of rescission as a remedy for unconscionable acts was reinforced in Australian Competition and Consumer Commission v Lux Distributors Pty. Moreover, the concept of equitable fraud occurs in this relationship between you and Louis Litt. This is because Louis received $ 300,000 from ATS without providing any services or products to the company. This is an element of fraud, and you can ask the court to declare the contract you have with Louis to be void, and be restored to you initial position. This is a fact that is supported in the case of Yerkey v Jones.
Finally, in the case of Harold, you can rely on the common law principle that was established in Strong v Bird to lay a claim on the property belonging to your mother. This includes the $ 250,000 that Daniel wrongly gave to his son Harold. Daniel did not have the authority to give any property to his son, because it was not serving the interest of his client Edith. On this note, you can invoke the provisions contained in Vadasz v Pioneer Concrete, to claim the $ 250,000 from Daniel Paulson. Note that, you are only entitled to 4 250,000, since the aim of rescission is to return you to the initial position of the will, which was $ 500,000.
In some case where the plaintiff has committed a bad conduct in that case the defendant may claim doctrine of unclean hands. The doctrine of unclean hands may prevail under some situation the person that is it may be the defendant or the plaintiff has failed to honour the contract agreement. In that case the doctrine may prevail. If the plaintiff has acted dishonestly or has fraudulently this against the nature of the contract, in that case the doctrine of unclean hands may prevail.
If the plaintiff has performed a crime that is in relation with the contract, in that case the doctrine of unclean hands will prevail. If the plaintiff has forced the person to go into contract with him and late comes to court for aid against that person for that same contract, in that case the defendant may claim for doctrine of unclean hands. In case the contract that the plaintiff has gone into has been achieved with violence or committing any fraud, in that case the doctrine of unclean hands could be claimed from the side of the defendant.
Taking example of a Famous case: John Everet Vs Joseph Williams
In the case that John Evert vs. Joseph Williams, were both highway robbers, who entered into a partnership where they robbed highway travellers and split the loot of their robberies. After the looted things were sold and divided, Evert thought that he did not get the fair share of the looted amount and took Williams to the court. As the court came to know about the act of both the parties that the disputed amount that they were talking about was actually an amount of loot. The court dismissed the case and issued warrant against both the parties declaring them guilty.
As the case tells us that in this situation where both the parties are guilty of starting the problem that they want to resolve in court, they will not get any aid from the side of the court. So in order to get any aid or resolution one needs to be free from any wrongful act.
This means that those who seek justice should do justice.
As when a defendant appeals for the doctrine of “clean hands” to cancel the charges that have been brought upon him then the court will see if the plaintiff has performed any misconduct or not and if he has then it needs to be found whether the misconduct is in relation to controversy for which the plaintiff has appealed for.
The court will see if the Plaintiff is engaged in a fraudulent or illegal misconduct more or less in relation to the case or he has performed any misconduct at the end and ants that status quo should be resolved back to the previous situation. If the desired relief and harm the interest of other in that case it can be denied by the court.
The doctrine says that justice is not served by doing any harm to the third party. So if ever there is a situation that by any decision if taken by the court can harm someone in that case the decision will not stand in the court of law.
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