MLC101 PAST EXAM QUESTIONS FOR WEEK 11 CLASS
PAST EXAM QUESTION: T1 2020
Luca is a director of Cinelli Ltd. Cinelli Ltd sells pet toys called ‘Amuse’. The toys are not selling well and the company is running low on working capital. To remedy the situation, Luca obtains an unsecured loan of $500,000. Luca thinks that the company will be able to pay the loan back because it is nearing the end of the year and his projections suggest he will sell lots of toys around Christmas.
Unfortunately, things don’t go as expected and Luca doesn’t sell as many toys as he anticipated. It is now January — a slow period for selling pet toys. Luca is aware of s 588G of the Corporations Act 2001 (Cth) and doesn’t want to breach it. He hires Winky & Dinky Accountants to prepare a solvency report. The report shows that Cinelli Ltd has net assets and, based on projections, can pay its debts when they fall due. Based on the report, Luca has the company enter into a contract to purchase $5 million worth of material for toy manufacturing.
It transpires that Winky & Dinky’s report was incorrect, and Cinelli Ltd is placed into liquidation. Does Luca have any liability under s 588G of the Corporations Act? Why/Why not? (Do NOT discuss penalties.)
Please use case law and statute to support your answer.
PAST EXAM QUESTION: T3 2020
Mya decided to have an extension built so she called master builder Damien to give her a quote. Because the extension was substantial and would cost $50,000, Mya decided to have it built in four stages. The building contract between Mya and Damien provided for four stages of building works, with $12,500 payable to Damien at the completion of each stage. Damien commenced work on stage one in November 2020 and completed it in January 2021. Due to COVID-19, Mya was made redundant, and she is now worried about her ability to pay for the extension. Her friend, Fred, tells her not to worry. He said since Damien has only completed stage one of the job, he is not entitled to be paid under the contract at all, not even the $12,500. Fred also said she can terminate the contract early and that Damien cannot claim any damages against her.
Was Fred correct to advice Mya that she does not have to pay Damien anything and that Damien is not entitled to damages if she terminates the contract early? Why/Why not? Please use case law to support your answer. (Do NOT discuss frustration.)
PAST EXAM QUESTION: T1 2020
Jack owns a restaurant that serves fusion food. He has decided to add a new range of noodle dishes to his menu. He has placed a large sign on the restaurant window promoting his new noodle dishes as ‘the best noodles in town, made with all fresh ingredients!’. Zoe, the owner of Yummy Noodles, the Chinese restaurant next door, is rather annoyed about the sign. She has been serving noodles for years. She has accused Jack of misleading customers, because she knows that Jack still uses tinned ingredients in his noodle dishes. Jack’s response is that even if the ingredients are from a tin, they are fresh from the tin. Zoe has now threatened legal action under s 18 of the Australian Consumer Law to stop Jack from using the sign.
Is Zoe likely to succeed in her action? Why/Why not?