Faculty of Business and Enterprise

Assignment Cover Sheet for Postgraduate Courses

(for individual and group assignments)
This cover sheet is to be attached to all assignments, both hard copy and electronic format.

STUDENT(S) DETAILS
Student 1 Student 2 Student 3 Student 4 Student 5
Student ID Number(s) 101014646

Family Name(s) BUI

Given name (s) Huyen
PROGRAM TITLE

SUBJECT DETAILS
Subject Code LAW 60003 Subject Title Corporation and Contract Law
Lecturer’s Name Alex Wan

ASSIGNMENT DETAILS
Title or Topic
Addressed
LAW INDIVIDUAL ASSIGNMENT

Due Date May 21, 2017 Date Received

DECLARATION
1. I/We hold a photocopy or electronic copy of this assignment which can be produced if the original is lost/damaged;
2. To the best of my/our belief, no part of this assignment has been copied from any other student’s work or from any other
source except where acknowledgement is made in the text;
3. No part of this assignment has been written for me/us by any other person except where such collaboration has been
authorised by the lecturer concerned and where acknowledgement is made in the text;
4. No part of this assignment has been previously submitted as an assessable item, except where authorised by the lecturer
concerned and where acknowledgement is made in the text;
I / We accept that electronic submission of this cover sheet will be taken as consent to the terms outlined in Points 1 to 4 of
the above declaration by the student/submitting this assignment.

Student Signature(s)

MARKER’S MAIN COMMENTS

Marker’s Signature Date Grade/Mark

Corporation and Contract Law
(LAW60003)
INDIVIDUAL ASSIGNMENT

Student name: Huyen BUI

Student ID: 101014646
Lecturer: Alex Wan

May 20th, 2017

LAW 60003 – Assignment

Computers Pty Ltd is IT company, which retail software and hardware by Mr. Chu - an

Operations Manager. As a manager, Mr. Chu has a position, which can be approach

important details of this company about major clients in New South Wales. He agreed

sign a contract of retires include a non-compete condition with Computer Pty Ltd for two

years in New South Wales. However, after one month signed his employment contract,

his wife - Mrs. Chu registered Systems Pty Ltd for purpose of participating in retail

market in computer software and hardware and her company "actively solicit business

from the customers" of Computers Pty Ltd in New South Wales. Three months later since

Mr. Chu leaved job, Computers Pty Ltd transferred all software business to an affiliation

company called Software Pty Ltd with same directors and management. From all of this

facts, Computer Pty Ltd can sue System Pty Ltd because of soliciting its clients or not.

First of all, Mr. Chu has some evidence to against Computer Pty Ltd. From March 2014

to moment, Chu doesn't work at Computers Pty Ltd, thus, Computers Pty Ltd can not

claims that Chu took as well as misused information from his former company about

customers or trading. Moreover, Mr. Chu's wife is only director and shareholder of

Systems Pty Ltd and she did not sign any document with Computer Pty Ltd about non-

compete its. Therefore, in this case, Systems Pty Ltd is free to seeking and attracting

customers from Computers Pty Ltd.

Secondly, based on section 45A Corporations Act 2001, Computers Pty Ltd, Software

Pty Ltd and Systems Pty Ltd are proprietary companies. In addition, like Salomon v

Salomon & Co [1897] AC 22, all of these companies are acted as a company's separate

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LAW 60003 – Assignment

legal personality and distinct from its directors and shareholders1. Thus, it can be argue

that Computers Pty Ltd is regarded as separate legal entity to its daughter company,

Software Pty Ltd. And Chu had agreed with Computers Pty Ltd not Software Pty Ltd.

Because of these above restrictions, to recommend Computers Ltd Pty, if this company

wants to sue against Systems Pty Ltd, they need to prove that:

- Software Pty Ltd is an agent of Computers Pty Ltd and not a separate legal entity. Thus,

the losses of the parent company’s system, Computers Pty Ltd led to the loss of customer

in Software Pty Ltd as well as Systems Pty Ltd was established as a fraud and sham of

Chu to avoid legal law (Ramsay & Noakes 2001).

- Under Common Law, what is the relevant reason to pierce the corporation veil?

Following these, Computers Pty Ltd must prove that three companies is the case of

“pierce the veil” and make a shareholder responsible liable for the actions of the

corporation2. According to Salomon v Salomon & Co [1897] AC 22, Australian courts

have agreed to lift the corporation veil in some cases: agency, fraud, sham or façade,

group enterprises, or unfairness/justice 3 . Hence, Computers Pty Ltd can persuade that

Systems Pty Ltd – a subsidiary company has acted as an agent of it. Like Smith, Stone

and Knight Ltd v Birmingham Corporation, because both of Software and Computers

1 Salomon v Salomon & Co [1897] AC 22 (Salomon). For extended discussion of

Salomon, see R Grantham and C Rickett (eds), Corporate Personality in the 20th
Century, 1998.
2 Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 (SCNSW,

Young J); Ian Ramsay and David Noakes, ‘Piercing the Corporate Veil in Australia’
(2001) 19 Company and and Securities Law Journal 250.
3 Briggs v James Hardie & Co Pty Ltd 13; Hargovan, Anil, ‘Piercing the Corporate Veil

on Sham Transactions and Companies’ (2006) 24 Company and Securities Law Journal,
436; Anil Hargovan and Jason Harris, ‘Piercing the Corporate Veil in Canada: A
comparative analysis’ (2007) 28 The Company Lawyer (UK) 58; Anderson, Helen,
‘Piercing the Veil on Corporate Groups in Australia: The Case for Reform’ [2009] 33
Melbourne University Law Review, 333;

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LAW 60003 – Assignment

have the same directors, business and locations, so it can be treated that profit of

Software Pty Ltd is profit of principal. The subsidiary in this case, Software Pty Ltd has

been described as the “alter ego” of the holding company 4 . An employment contract

between Mr. Chu and Computer Pty Ltd has the same valid with Software Pty Ltd. Mr.

Chu is liable with Software Pty Ltd when this company is damaged loss of revenue from

actively solicits clients business's System Pty Ltd.

Furthermore, Lord Sumption has confirmed that the corporate veil applies if a person has

an existing legal obligation or liability or an existing legal restriction, through interposing

a company under his/her control, he/she deliberately evades or frustrates the

enforcement5. Basically, the principle rule in Salomon’s case and lifting the corporate

veil's purpose is to “ deprive the company or its controller of the advantage that they

would otherwise have obtained by the company's separate legal personality”. In Australia

courts, the corporate veil may be pierce “where a company is used as a fraud or a sham

by the shareholders to escape liability”, thus, shareholders were liable. In this case,

although Mr. Chu is not director of Systems Pty Ltd, he can be seen as “Shadow

Director”. Because he is a former employee in Computers Pty Ltd, he has the contacts of

the customers of Computers Pty Ltd. In reality, Mr. Chu is involved in directing Systems

Pty Ltd through Systems Pty Ltd continuously solicits customers of Software Pty Ltd.

Therefore; he can be regarded as shadow director who has actual authority in Software

Pty Ltd. It was held in Gilford Motor Co Ltd v Horne, that Horne was a director of the

Gilford Motor Co Ltd before fired 6 . His agreement has stipulated non-solicit clients’

4
Alex Wan, Corporation and Contract Law, Thomson Reuter (2015)
5 Prest v Petrodel Resources Limited & Others [2013] UKSC 34
6 Gilford Motor Co Ltd v Horne Corporation

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LAW 60003 – Assignment

company when he lay off job. However, he ignored it and set up competitor business with

director – his wife and a sole shareholder – his friend. He used company as a corporate

veil in violation of restrain of trade clause and conceal him illegitimate action. When

Gilford sued, the court has an injunction against Horne because Horne was in breach of

contract and he was liable. Similarly, Chu is in the same position of Horne. His wife’s

company – Systems Pty Ltd was established as a sham for the purpose of committing

fraud.

In addition, under s183 Corporations Act 2001, a director or employee of a company can

not allowed to share advantage company's information for themselves or someone else

like wife, partners and harm the benefit of the company. This duty applies both former

and current directors, employees. Thus, although Chu retired Computers Pty Ltd, he still

has liable.

In conclusion, if Computers Pty Ltd sues Systems Pty Ltd and Mr. Chu about soliciting

its clients in order to loss of its revenue, company can win based on evidences like:

Software Pty Ltd is an agent of its company and Chu used Systems Pty Ltd as a fraud or

improper purpose to protect himself from breach of employment agreement with

Computers Pty Ltd.

Word count: 1302

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LAW 60003 – Assignment

BIBLIOGRAPHY
1, Anil Hargovan, ‘Piercing the Corporate Veil on Sham Transactions and Companies’

(2006) 24 Company and Securities Law Journal 436.

2, Anil Hargovan and Jason Harris, ‘Piercing the Corporate Veil in Canada: A

comparative analysis’ (2007) 28 The Company Lawyer (UK) 58.

(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980366)

3, Ian Ramsay and David Noakes, ‘Piercing the Corporate Veil in Australia’ (2001) 19

Company and Securities Law Journal 250.

(http://law.unimelb.edu.au/files/dmfile/Piercing_the_Corporate_Veil1.pdf)

4, Jason Harris, Anil Hargovan, ‘Corporate groups: the intersection between corporate

and tax law Commissioner of Taxation v BHP Billiton Finance Ltd’ (2010) 32 Sydney

Law Review 723.

(http://sydney.edu.au/law/slr/slr_32/slr32_4/Harris_and_Hargovan.pdf)

5, Helen Anderson, ‘Piercing the Veil on Corporate Groups in Australia: The Case for

Reform’ [2009] 33 Melbourne University Law Review 333.

(http://www.law.unimelb.edu.au/files/dmfile/33_2_1.pdf)

6, Wan, Alex, Corporation and Contract Law (Thomson Reuter, 2015)

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