Facts of the Case

The case of Australian Securities and Investment Commission v Sino Australia Oil and Gas Limited (in liq) [2016] FCA 934 has been selected for this part of the assignment. The case has been selected as it has two years since the case has been decided and the same is concerned with the director’s duties. This case resulted in a decision in favour of ASIC incurring a penalty on Sino of $80000 accompanied by a suspension for its director for a period of 20 years prohibiting him from being in the management of a company registered under the ASX. It has been contended by the court in this case that the company and its director has breached several provisions of the Corporations Act 2001.  In this case the director had lead the company to get involved in illicit activities owing to his poor understanding of English and failed to abide by the disclosure requirements as are mandatory in Australia.

The issue in this case has been initiated with the company raised an amount of 13.6 million form a public hearing and the prospectus issued for that purpose had failed to abide by the disclosure requirement as provided for under the Corporations Act. The failure to abide by the disclosure requirements had affected the worth of the shares drastically. The director was also alleged to have attempted to make a transfer of the whole cash holding of the company amounting to $7.5 million to China, which has failed because of injunction obtained by ASIC freezing the bank account of the company.

A liquidator has been appointed by the court in this case and had contended that the company is liable to have breached section 674(2), 728(1) and 1041H and the director has contravened section 180(1) and 674(2) of the Corporations Act. 

In this case, the ASIC has forwarded an allegation against the director of the company to have indulged into actions which are violative of section 180(1) of the Corporations Act. Section 180(1) of this Act requires a director to be diligent and to exercise due care to a level of a reasonable person while exercising his duties as a director. However, in this case the director had failed to maintain that degree of care while discharging his duties.

The director in this case has also contravened the provision of section 728(1)(a) of the Act by making a misstatement in  the prospectus. The disclosure requirements provided by the provisions contained in section 674(2) has also been breached by the director in this case, which has affected the worth of the shares materially.

Director violating Corporations Act

The director was also alleged to have violated the provisions contained in section 728(1)(b) of the Act for the failure to disclose the loan, which has been extended to the Chinese Subsidiary and section 728(1)(c) for failure to disclose an accurate profit forecast in the prospectus.

The Director’s contravention of several provisions of the Act points towards the directors failure to act in a reasonable manner exercising due care and diligence. This makes him liable for the violation of section 180(1) of the Corporations Act.

The court in this case while analysing the allegation of contravention of section 674(2) held that the director has failed to disclose the negative growth in the profit of the company and the increased expenditure in the leased equipment, which information was not supposed to be disclosed or assumed by the public if not disclosed by the company. This disclosure would have affected the worth of shares of the company materially. The court has based its decision on the evidence made available by the translator.

The director in his defence contended that the failure to satisfy the disclosure requirements in the prospectus was owing to his poor understanding of the English language as he could not realise the proper meaning of the contents of the prospectus. The court overruled this contention by saying that the director would have availed a translation of the same with the help of a translator before signing the same. In this context, the court has referred to the case of Australian Securities and Investments Commission v Healey [2011] FCA 717 per Middleton J at [22].

Moreover, the failure of availing a translation and signing a document without a proper understanding of the same has been viewed by the court as an violation of section180(1). This is owing to the fact that failure to act in such way implies a failure to exercise due care and diligence that a director must exercise under this section. The director also argued that it was not possible for the director to have knowledge about the law prevailing in Australia as he does not belong from the Australian origin. The court rejected this contention by stating the fact that his lack of knowledge about the law would not immune him to rely on the advice of other. In this regard, the court made a reference to the case of Australian Securities and Investments Commission v Citrofresh International Limited (No 2)  [2010] FCA 27 per Goldberg J at [56].

Exclusion Clauses in Contracts

Moreover, the failure to make accurate disclosure of the regarding the profit, the loan and the lease  of the same have been a breach of the Corporations Act committed by the director and is likely to incur legal and financial risk to the company. Therefore, the court’s decision has been appropriately delivered in convicting the director to have violated the provisions contained in section 180(1), 674, 728 and 1014H. 

The decision delivered in this case has an application in cases where the directors having inadequate knowledge of the English language seeks immunity under the same, in getting away with their misdeeds, which will arise in Australia. The directors are not supposed to sign a document unless they obtain a proper understanding of the same. They can avail an understanding through the use of a translator. The director should not rely on the advice of others regarding the actions, which will affect the company in a material way.

Whether the railway company could successfully rely on the exemption clause to protect itself from an action by Mandrake.

An exclusion clause contained in a contract is a term of the contract that has the effect of excluding a party involved in the contract limiting his liability towards a specific condition. The main objective of inserting this clause is to limit the liability of one of the parties to the contract for negligence and contravention of the contract (Haigh, 2018). To be considered effective the exclusion clause must be contained in the contract in a clear manner and must not be unfair or oppressive. The same can be illustrated with the case of Curtis V Chemical Cleaning Co [1951] 1 KB 805.

In certain situations, the exclusion clauses are also inserted in a document or instrument, which are not signed by the parties. Such documents includes a ticket or a notice. In these circumstances an expressed, sufficient and reasonable notice is required to be furnished by the party providing such document. The exclusion clause in these situations can only be enforced if it can be proved that the party thus affected by the exclusion clause had actual knowledge of the same. The party striving to enforce the exclusion clause must apply sufficient effort in making the aggrieved party aware of the exclusion clause. A proper notice of the exclusion clause must be extended to the party against whom the exclusion clause is required to be enforced.

Exemption Clause in the Railway Case

In the case of Olley v Marlborough Court [1949] 1 KB 532, some goods belonging to the plaintiff has been stolen from her hotel room in which she was staying. It was contended by the hotel authorities that an exemption clause holding them not liable for any stolen item has been provided in the back of her bedroom door. The court held that the contract to stay in the hotel was entered into before her stay in the room so proper notice of the exemption clause was not extended to her. 

In the present situation, Mandrake received a ticket for depositing four suitcases. However, the suitcases were tampered with and several items were stolen by his assistant who got access to the suitcase without presenting any ticket to the parcels office.

On being sued for damages, the railway pointed towards an exemption clause that have been inserted in the ticket. The exemption clause excluded the incurrence of any liability by the railway in case of any damage to any of the articles. But in this case the exemption clause was not sufficiently communicated to Mandrake. Being an unsigned document and an acknowledgement of the payment, the exclusion clause must have been expressly communicated to Mandrake before the contract was entered into. But the ticket was made available to him after the contract was entered into and the payment effecting the same. So, by applying the rule established in the case of Olley V Marlborough Court [1949] 1 KB 532 the railway authorities will not be able to enforce the exclusion clause.

Conclusion

The railway company could not successfully rely on the exemption clause to protect itself from an action by Mandrake

Whether any legal course of action is available to Owen in this situation.

A contract implies an agreement initiated by an offer accompanied by an acceptance of the same. The contract must be formed with an intention of creating legal relationship. The consent of both the parties must free from any duress, misrepresentation, fraud or mistake. A contract entered by a person whose consent was obtained by misrepresentation is voidable and incurs a right towards the person whose consent was so obtained to either rescind the contract or ratify it. The aggrieved party may also claim for damages for the same. However, once the aggrieved party is made aware of such a misrepresentation or gained knowledge of the same continues to perform the contract, the contract is automatically ratified and the aggrieved party would lose his right to repudiate the contract (Boundy, 2016).

Misrepresentation in Contracts

However, a party involved in a contract, who has put his signature in the documents effecting the contract will not be able to claim any dispute regarding his agreement to any of the terms of the contract. This is owing to the contention that a person putting his signature in a document is assumed to have read the document irrespective of the fact whether he has actually read the document or not. The same can be illustrated with the case of L’Estrange V Graucob [1934] 2 KB 394. It was held in the case of Blay v Pollard And Morris [1930] 1 K.B 682, where a document containing the terms of the contract has been signed by the parties entering into the contract, the same will be rendered binding upon the parties and the parties would not be excused for not reading the terms contained in the document. 

In the present situation, Owen Rowland cannot be regarded as a consumer under the Australian Consumer Law as the ovens ordered by him is to be used for commercial purposes and not for domestic purposes as is required by the consumer law. Therefore, the consumer law will not be applicable in this case.

The contract between Owen Rowland and the Restaurant Equipment Pty Ltd for the supply of three ovens, which needed replacement was entered into by way of a tender that was submitted by Restaurant Equipment Pty Ltd in response to a call for tender by Owen Rowland. The tender expressly excluded any warranty regarding the oven, which was accepted by Owen. This makes Owen to have agreed with the terms of the contract as he has been made aware of the exclusion of the warranty. Now he does not have the option of availing defence under absence of knowledge of the same. The same can be explained with the case of L’Estrange V Graucob [1934] 2 KB 394.

Conclusion

No legal course of action is available to Owen in this situation. 

Reference

Australian Securities and Investment Commission v Sino Australia Oil and Gas Limited (in liq) [2016] FCA 934

Australian Securities and Investments Commission v Citrofresh International Limited (No 2)  [2010] FCA 27 per Goldberg J at [56].

Australian Securities and Investments Commission v Healey [2011] FCA 717 per Middleton J at [22].

Blay v Pollard And Morris [1930] 1 K.B 682.

Boundy, C. (2016). Business contracts handbook. Routledge.

Haigh, R. (2018). Legal English. Routledge.

L’Estrange V Graucob [1934] 2 KB 394.

Olley v Marlborough Court [1949] 1 KB 532.

The Corporations Act 2001.