Business, Company and Conveyancing Law
Part B
Q. 1
Salomon v Salomon & Co. Ltd. (1897) is a landmark case on the incorporation, features, and nature of companies. The case is important in the formation of businesses in some respects. Firstly, the significance of the case with regards to the formation of companies is that it introduced the principle of a company being a separate, autonomous, distinct or independent entity from the owners or even the promoters of the enterprise. This is important in that it shields the owners from any liability that may be incurred on behalf of the company about its creditors. Further, the case is important in giving companies legal personality status hence making it possible for the company to own property, borrow money and do any other thing such as entering into binding legal transactions that a natural person can enter into (Puig 4). Moreover, this case is important in that it gives a company a limited liability status once it is formed hence members or shareholders can only be liable to pay its debts to the extent of their subscribed shares and no more.
Q. 2
No, Taylor and Brown Hairdressing cannot be taken as a purchaser in the contract of sale of the property. This is the principle or concept of a business entity that applies only to limited liability companies and does not apply to partnerships. The doctrine of a legal entity means that, unlike a company, a partnership lacks the legal rights to acquire and dispose of property and to enter into legal transaction s in its name and right. It cannot enter into contracts of sale and purchase. The partners of the business only act as its agents and can enter into binding business transactions on its behalf unless such operations are authorized by the Partnership Deed or Agreement. According to Hicks and Goo (65), the separate legal personality principle can only apply to limited liability partnerships and not to ordinarily limited partnerships. Since we are not told whether or not Taylor and Brown Hairdressing is an LLP, we cannot assume it is one hence it cannot enter into the transaction to purchase the property in a contract of sale in its right. It can only do so through one of the partners as provided for in the Agreement.
Q. 3
As a conveyancer for Anne and Beverley in the purchase of the property of the hairdressing business, the documents I must accurately advise on are the Deeds of Conveyance or Transfer document, and Consent document. Some of these papers may contain consequences such as the property being registered under a third party’s name. Hence I would communicate such results to the purchasers by advising them to do a thorough search to verify the ownership and encumbrance status of the property before they enter into the transaction. This may involve communication through letters or face to face communication with the clients.
Q. 4
Both of these forms of business units are relatively easy and less complicated to form regarding the legal documentation requirements for formation. Further, both partnerships and sole traders have unlimited liability (except for LLPs). This means that owners and partners in their personal capacities are liable to pay the debts of the business and that their individual properties can be attached to pay off creditors in case the business defaults on its financial obligations. Further, both business formations do not have separate legal entity status, and hence the death or bankruptcy of a sole trader or partner leads to an automatic dissolution of the business.
Differences
Firstly, sole proprietorships are unincorporated forms of business organizations while partnerships are incorporated. Further, a sole proprietorship, as the name suggests, is formed and run by one person while a partnership is an association between two or more people who jointly manage the affairs of business. Moreover, unlike a sole proprietorship, a partnership is operated and managed based on a partnership deed or agreement signed by each of the partners. It is like the Constitution of the association.
Similarities between a Private and Public Company
Both of these companies are subject to the same taxation and incorporation or formation requirements.
However, a private company is a type of corporation that is mainly run by private individuals and raises capital from private sources. On the other hand, a public company is a company that sells its shares to the public in the stock market as a means of raising its capital for investment. In most cases, the government has a stake in such a company and owns more than fifty percent of the shares of the company. Moreover, regarding management, a private company is usually managed by family members while public companies are operated by unrelated people.
Q. 5 Terms of Engagement
Estimate of Fees
We shall be availing to you all the written estimates of costs relating to any conveyancing job done on your behalf. This may not always be the same amount depending on any additional expenses. We may at any time deduct our fees from the trust account held on your behalf to pay for any disbursements, expenses or any other costs incurred in the course of a conveyancing transaction. We shall provide you with an invoice for each sale and the distribution of fees.
Confidentiality
All and any information relating to you and your affairs acquired in the course of acting on your behalf shall be held in confidence. Such information shall not under any circumstance be disclosed to third parties except with your written consent and authority.
Termination
You as the is at will to terminate our retainer at any time as long as you comply with the set statutory rules and procedures and have fulfilled all your financial obligations for any services rendered to you before your decision to terminate.
Retention of Files and Documents
Except for any other files and documents that you have authorized us to destroy after a transaction, we shall retain and keep in safe custody all the documents and files relating to your conveyances
Conflict of Interest
The available rules and principles of the governing body and society prohibit any conflict of interest in conveyancing transactions. Hence, we shall require you to notify us immediately of any conflict of interest likely to arise about any transaction we undertake on your behalf
However, the fact that we are acting on your behalf does not preclude this firm from acting for any other client concerning any legal matter even though doing so may be contrary to your interests
Q. 6
Illegality- Ensure that all the documents provided and used are genuine
Misrepresentation- Ask the client to provide all the relevant information relating to the property being transferred honestly and in good faith
Lack of capacity- Do a background check on the ability of the client to carry out a particular transaction.
Q. 7
Quality Surveyors- To determine the measurements of the property such as land
Accountants- To advise the client on financial matters and obligations
Lawyer/Solicitor - To draft the basic court documents and help with settlement claims
Q. 1
Firstly, one of the instructions I would need from Mr. John Smith is the ownership of the residential home. This is important as it helps in ascertaining the title to the residential home and who holds the right legal title. I would also require Mr. Smith to instruct me on the ownership details of the home such as whether it has any encumbrances like being attached to a mortgage or easements. Moreover, I will want Mr. Smith to instruct me on whether the residential home is on freehold or leasehold since different rules and legal principles apply to each one of them.
Additionally, I would require him to instruct me concerning the verification of identity and conflict of interest check. I will also want him to instruct me on his capacity as a client to sell the residential home and whether there are other buyers of the same property. I will also require a written authority from him confirming that he has the legal authority to deal in the property and that he has the valid title deeds of the property. Further, he will also need to instruct me on whether the property is registered or unregistered since different laws and principles apply to these.
Q. 2
A conflict of interest exists in a conveyancing transaction when the same conveyancer acts for or on behalf the same parties that have the same interests in the property. There could also be a conflict of interest between the conveyancer’s duty not to disclose client information and a similar obligation to maintain the confidentiality of all information supplied by different clients. This arises when a conveyancer deals with two or more clients or firms concerning the same subject matter. A conveyancer has a general duty not to act in case there is reasonable belief there is or is likely to arise any conflict of interest. The basis of this is that as a conveyancer, one is under a duty to act in the best interest of all their clients. However, it may not be possible to act in the best interest of two clients concerning matters that are related. Acting for both a purchaser and a seller of a property may sometimes create conflicts of interest though this may not be the case in all circumstances. In Bolkiah –v- KPMG [1999], it was held that a lawyer should not act on behalf of the same clients with the same interests without the consent of the clients involved. This has been affirmed in Marks & Spencer Group Plc and another v Fresh field Bruckhaus Deringer and Hilton v Barker Booth and Eastwood (2004). According to O'Donnell, however, based on the decision in Cleland v Morrison (1878), conflict of interest may only arise where there is imputed knowledge of the parties of the likelihood of the conflict arising or not (1).
Applying these principles to the case of Mr. Smith and Mrs. Brown’s representation, it may be argued that there is likely to be a conflict of interest only regarding the duty of confidentiality and also the duty of care. This is because since Mrs. Brown has been referred to me by her father who is my established client, I am more likely to be inclined to serve her better than Mr. Smith hence raising conflicts of interest.
Engagement Letter
Dear Peter Jones,
Re: Sale of your Residential Home at 10 Smith Street Werribee
I am profoundly grateful for you having chosen to instruct me to act on your behalf concerning the sale of your home in the address above. I am writing this engagement letter to bring to your attention the terms and conditions which shall be the basis for me to carry out the work you instructed me to do. Have a careful reading of them, please.
I have attached for your perusal my Schedule of Charges that will apply for the whole transaction and cover the transaction fees. These will be costs relating to the investigation of title, negotiation of the transfer document, advice on redemptions and mortgages, drafting of contracts, exchange, and completion, transfer of redemption funds and forwarding deeds.
Please also note that based on the money laundering regulations, I will need you to fill a client identify the form and return to me as soon as possible. I shall send you the document indicating the payments arrangements of fees and any amount due before I complete the job. I shall also require you to maintain accurate details concerning your insurance, mortgage, capital gains tax, and disclosure and energy performance certificate.
Thank you again for instructing me. I promise to deal with your matter efficiently and expeditiously.
Works Cited
Hicks, Andrea and SH Goo. Cases and materials on company law. Oxford & New Delhi: Oxford University Press, 2008. Print.
O’Donnell, David. "A conflict of interest: The scope of the conflict of the interest rule. with particular reference to imputed knowledge." The Journal of the Law Society of Scotland (2015): 1-6. Print.
Puig, Gonzalo Villalta. "A two-edged sword: Salomon and the separate legal entity doctrine." Munloch University Electronic Journal of Law 7.3 (2000): 1-10. Web. 12 August 2016. <http://www.austlii.edu.au/au/journals/MurUEJL/2000/32.html>.
