Question

Sarah had a farm in Margaret River where part of the land was used for growing grapes. Her business involved growing the grapes and selling the crop to a local winery that was run by Jane. Two years ago, Sarah and Jane decided to go into business together and register a company Sarah Jane Pty Ltd, with the intention that Sarah would look after the growing of the grapes and Jane would extract the wine and promote the sale of the wine. Before the company was registered, Sarah’s accountant, Horace Rumpole, ordered some winemaking machinery from Joe Machinery Ltd under a contract, which he signed as “agent of Sarah Jane Pty Ltd.” Sarah Jane Pty Ltd issued 300,000 $1 shares to Sarah and 200,000 $1 shares to Jane. Both Sarah and Jane transferred their businesses to the company in exchange for the shares. Sarah and Jane were made the directors of Sarah Jane Pty Ltd. The business was very successful and required more capital, so a year ago Sarah and Jane decided to convert Sarah Jane Pty Ltd into a public company, ‘Sarah Jane Ltd’ with the following constitution:

“The provisions of the Corporations Act 2001 (Cth) shall apply to this company except for the following:

1.Horace Rumpole shall be the company’s accountant until 31 December 2016.
2.The company shall only grow grapes and operate a wine making business Sarah Jane Ltd now has a large number of shareholders through the issue of 1 million shares to the public and the directors of the company are Sarah, Jane and Kate.

Six months ago, the directors of Sarah Jane Ltd decided that since they did not require all the land for growing grapes for their winery, they would grow wild flowers on a portion of it. This decision was based on recommendations from Horace Rumpole. Being confident of the wild flower crop, Sarah Jane Ltd entered into a contract to supply Hilda Florists Ltd. However, the soil in the vineyard proved to be unsuitable for growing wild flowers and Sarah Jane Ltd could not supply Hilda Florists Ltd. Hilda Florists Ltd had to purchase replacement flowers at great expense and demanded compensation from Sarah Jane Ltd. The directors of Sarah Jane Ltd have argued that their company could not be liable as it was beyond its capacity to enter into such a contract and Hilda Florists Ltd should have known this. With reference to the relevant sections of the Corporations Act (2001) (Cth) and case law, answer the following four questions:

Question Four – 7 Marks

Sarah and Jane are displeased with Horace and wish to remove him as the company’s accountant. Can Horace enforce the clause in the company’s constitution pertaining to his employment as the company’s accountant?

Answer 1

In the current scenario, termination of employment contract is completely dependent on the provision and clauses of the employment contract.

The employment contract along with period up-to date services are to be rendered , also includes all necessary terms and conditions surrounding an event of termination.

The employer is empowered to terminate the employment of any employee who breach the provision. Breach of employment contract may arise due to various causes such as providing misleading information, failure to conform with company policy etc.

In these contracts, courts and tribunal cannot interfere with its contents as the employment Co tract is read, understood and accepted by the employee.

In this case, rights of employees are implied by way of the procedure to be followed by the employer in case of termination. Following are the rights of employee:

1) Right to receive a notice of termination of employment

2) Right to be heard.

3) Right to have an inquiry conducted.

4) Right to receive a severance pay.

5) Right to see in case of illegal or unlawful termination.