Question

Scenario 1:

Paul is working for himself as a mechanic under the business name “Paul’s transport services”. He forms a small proprietary company called “P & M Pty Ltd” with himself and his wife Milli as its only directors and equal shareholders. He sells the business and its assets (tempo and a truck and some equipments)to the company for $100,000 and the company pays this full amount to Paul immediately.

The company takes out Workers Compensation for Paul. Although the tempo was insured in Paul’s name with AMP Insurance Co. when it was sold to the company, the insurance policy was not transferred into the company name, nor did the company take out its own insurance policy.

• Two months later the tempo is damaged in an accident and estimated repairs are $20,000. Paul makes a claim under this policy but the insurance Company refuses to pay the claim
• The following week Paul suffers a serious hand injury while loading a customer’s goods on the tempo and is unable to work for several weeks. The Workers Compensation Insurer will not recognise Paul as a “worker” and refuses to pay him any benefits.

Based on above case scenario and answer the following questions:

1. Why did the Insurance company refuse to pay Paul for the repairs?
2. Why did the Workers Compensation refuse to pay Paul any benefits? Is he entitled to receive the benefits?
3. Advise Paul on his course of action.

HINTS: A company, once registered, is a separate legal entity, separate from its participants. Section 124 of the Corporations Act 2001 gives a company the same capacity and powers of an individual together with such powers that may be exercised by a body corporate, power to acquire, own or dispose of property.

Answer 1