Week 12 Revision Notes
Saturday, October 11, 2025 2:42 PM
Revision Notes:
Exam Specific Notes:
1. You don't need to restate the facts in your answer (waste of time)
2. If you can relate two cases together, eg talk about their similarities and how it ties in with
the scenario, you get more marks.
3. Consider potential counter arguments
4. Mention both legislation and case law
5. Consider any possible defenses and remedies
6. Think about what the client needs/wants you to do.
7. Link legislation back to cases and explain how it's relevant to the client.
Topics 1 to 4:
-Corporate Personality
-The Incorporation process
-The corporate constitution
-Contracting by companies
-Administration of companies and management of the business of companies
What are business structures?
-In a practical sense: gatherings of groups of like-minded people
-Business structures include: Sole proprietor, company, partnership, unincorporated
association, incorporated association, trust.
-Company Salomon v Salomon & Co Ltd (1897)
-Registration with Commonwealth regulator : ASIC
-Governing legislation is Corporations Act 2001
-Inclusions of suffix at the end of the origination's name:
• Proprietary Limited (or "Pty Ltd") - for a private company
• Limited ("Ltd") - for public company
-A reference to an identifying number e.g. ACN or ABN
ABN – Australian Business Number
-11-digit number issued by the Australian Taxation Office (ATO).
-Required for all types of businesses: sole traders, partnerships, trusts, and companies.
Used for:
-Tax and GST registration
-Issuing invoices
-Registering a business name
-Interacting with government agencies
ACN – Australian Company Number
Principles of Company Law Page 1
,ACN – Australian Company Number
-9-digit number issued by ASIC (Australian Securities and Investments Commission).
-Only applies to registered companies (e.g. Pty Ltd).
Used for:
-Legal identification of companies
-Company filings with ASIC
-Displaying on official documents (e.g. contracts, letterheads)
Company as a separate legal personality
-Registration under Corporations Act s119
-The company is liable for its own debts (not the members or officers) established in
Salomon
-Company can contract with one of its controllers, e.g a director can also be contracted by the
company as an employee: Lee v Lee's Air Farming Ltd.
-Company's property is not property of its participants: Macuara v Northern Assurance Co
Ltd
-Company can own property, so can own shares in another company and create a "corporate
group" e.g holding/parent & subsidiary Company's
-Pre-incorporation contracts & promoters: ss131-133
Relevant cases and legislation explained:
Lee v Lee's Air Farming Ltd (1961)
Facts:
-Mr. Geoffrey Lee formed Lee’s Air Farming Ltd, a company in New Zealand that
specialized in aerial topdressing (spreading fertilizer by aircraft).
He was:
• The sole director,
• The chief pilot, and
• Held 2999 of the 3000 shares in the company.
-Tragically, Mr. Lee died in a plane crash while piloting for the company.
-His widow, Mrs. Lee, sought compensation under the Workers’ Compensation Act 1922,
claiming her husband was an employee of the company.
Legal Issue:
1. Could Mr. Lee be considered an employee of the company he effectively owned and
controlled, thereby entitling his widow to compensation?
Privy Council Decision:
-The New Zealand Court of Appeal had rejected the claim, arguing that Mr. Lee could not be
both employer and employee.
-The Privy Council overturned that decision, holding:
-A company is a separate legal entity from its shareholders and directors.
-Mr. Lee had entered into a valid contract of employment with the company.
-Therefore, he was an employee, and his widow was entitled to compensation.
-“It is well established that the mere fact that someone is a director of a company is no
impediment to his entering into a contract to serve the company.” — Lord Morris of Borth-y-
Gest
Significance:
Principles of Company Law Page 2
,Significance:
-Reinforces the doctrine from Salomon v Salomon & Co Ltd (1897).
-Clarifies that corporate structure allows individuals to wear multiple hats—owner, director,
employee—without collapsing legal boundaries.
-Frequently cited in cases involving corporate liability, employment rights, and piercing the
corporate veil.
Macuara v Northern Assurance Co Ltd (1925)
Facts:
-Mr. Macaura owned a timber estate and later transferred the timber to a company he had
incorporated—Irish Canadian Sawmills Ltd—in exchange for fully paid shares, making him
the sole shareholder.
-Despite transferring ownership, Macaura took out fire insurance policies in his own name,
not in the company’s name.
-A fire destroyed the timber, and Macaura sought to claim under the insurance policy.
-The insurer, Northern Assurance Co Ltd, refused to pay, arguing that Macaura had no
insurable interest in the timber.
Legal Issue:
1. Did Mr. Macaura have an insurable interest in the timber, even though it was owned by the
company of which he was the sole shareholder
Judgement:
-The House of Lords held that Macaura did not have an insurable interest in the timber.
-Although he was the sole shareholder and major creditor, he had no legal or equitable
ownership of the timber.
-The timber was owned by the company, which was a separate legal entity.
-Therefore, only the company could insure the timber.
-“The corporator even if he holds all the shares is not the corporation… neither he nor any
creditor of the company has any property legal or equitable in the assets of the
corporation.” — Lord Wrenbury
SECT 119 - Company comes into existence on registration
A company comes into existence as a body corporate at the beginning of the day on which it
is registered. The company's name is the name specified in the certificate of registration.
Note: The company remains in existence until it is deregistered (see Chapter 5A).
CORPORATIONS ACT 2001 - SECT 131 Contracts before registration
(1) If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit
of, a company before it is registered, the company becomes bound by the contract and
entitled to its benefit if the company, or a company that is reasonably identifiable with it, is
registered and ratifies the contract:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time--within a reasonable time after the contract is entered into.
(2) The person is liable to pay damages to each other party to the pre - registration contract if
the company is not registered, or the company is registered but does not ratify the contract or
enter into a substitute for it:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time--within a reasonable time after the contract is entered into.
Principles of Company Law Page 3
, (b) if there is no agreed time--within a reasonable time after the contract is entered into.
The amount that the person is liable to pay to a party is the amount the company would be
liable to pay to the party if the company had ratified the contract and then did not perform it
at all.
(3) If proceedings are brought to recover damages under subsection (2) because the
company is registered but does not ratify the pre - registration contract or enter into a
substitute for it, the court may do anything that it considers appropriate in the circumstances,
including ordering the company to do 1 or more of the following:
(a) pay all or part of the damages that the person is liable to pay;
(b) transfer property that the company received because of the contract to a party to the
contract;
(c) pay an amount to a party to the contract.
(4) If the company ratifies the pre--registration contract but fails to perform all or part of it,
the court may order the person to pay all or part of the damages that the company is ordered
to pay.
CORPORATIONS ACT 2001 - SECT 132 Person may be released from liability but is
not entitled to indemnity
(1) A party to the pre—registration contract may release the person from all or part of their
liability under section 131 to the party by signing a release. (2) Despite any rule of law or
equity, the person does not have any right of indemnity against the company in respect of the
person's liability under this Part. This is so even if the person was acting, or purporting to act,
as trustee for the company.
CORPORATIONS ACT 2001 - SECT 133 This Part replaces other rights and liabilities
This Part replaces any rights or liabilities anyone would otherwise have on the pre--
registration contract.
Piercing the corporate veil
Under common law requires extreme fact patterns:
-Subsidiary treated as an agent of the parent on facts: Smith Stone & Knight
-New Company created to avoid existing legal obligation: Gilford Motor Co Ltd v Horne
-Corporate Group? unlikely per Walker v Wimbourne
-Corporations Act e.g s588G
Relevant cases and legislation explained:
Smith, Stone & Knight Ltd v Birmingham Corporation [1939]
Facts:
-Smith, Stone & Knight Ltd owned a waste paper business in Birmingham.
-The business was operated on land leased by a subsidiary company, Birmingham Waste Co
Ltd.
-Birmingham Corporation compulsorily acquired the land under public powers.
-Smith, Stone & Knight Ltd claimed compensation for disturbance of its business under the
Land Clauses Consolidation Act 1845.
-The Corporation argued that the subsidiary, not the parent company, occupied the land—so
the parent had no right to compensation.
Legal Issue:
1. Could the parent company claim compensation for disturbance even though the subsidiary
held the lease and operated the business?
Principles of Company Law Page 4
Saturday, October 11, 2025 2:42 PM
Revision Notes:
Exam Specific Notes:
1. You don't need to restate the facts in your answer (waste of time)
2. If you can relate two cases together, eg talk about their similarities and how it ties in with
the scenario, you get more marks.
3. Consider potential counter arguments
4. Mention both legislation and case law
5. Consider any possible defenses and remedies
6. Think about what the client needs/wants you to do.
7. Link legislation back to cases and explain how it's relevant to the client.
Topics 1 to 4:
-Corporate Personality
-The Incorporation process
-The corporate constitution
-Contracting by companies
-Administration of companies and management of the business of companies
What are business structures?
-In a practical sense: gatherings of groups of like-minded people
-Business structures include: Sole proprietor, company, partnership, unincorporated
association, incorporated association, trust.
-Company Salomon v Salomon & Co Ltd (1897)
-Registration with Commonwealth regulator : ASIC
-Governing legislation is Corporations Act 2001
-Inclusions of suffix at the end of the origination's name:
• Proprietary Limited (or "Pty Ltd") - for a private company
• Limited ("Ltd") - for public company
-A reference to an identifying number e.g. ACN or ABN
ABN – Australian Business Number
-11-digit number issued by the Australian Taxation Office (ATO).
-Required for all types of businesses: sole traders, partnerships, trusts, and companies.
Used for:
-Tax and GST registration
-Issuing invoices
-Registering a business name
-Interacting with government agencies
ACN – Australian Company Number
Principles of Company Law Page 1
,ACN – Australian Company Number
-9-digit number issued by ASIC (Australian Securities and Investments Commission).
-Only applies to registered companies (e.g. Pty Ltd).
Used for:
-Legal identification of companies
-Company filings with ASIC
-Displaying on official documents (e.g. contracts, letterheads)
Company as a separate legal personality
-Registration under Corporations Act s119
-The company is liable for its own debts (not the members or officers) established in
Salomon
-Company can contract with one of its controllers, e.g a director can also be contracted by the
company as an employee: Lee v Lee's Air Farming Ltd.
-Company's property is not property of its participants: Macuara v Northern Assurance Co
Ltd
-Company can own property, so can own shares in another company and create a "corporate
group" e.g holding/parent & subsidiary Company's
-Pre-incorporation contracts & promoters: ss131-133
Relevant cases and legislation explained:
Lee v Lee's Air Farming Ltd (1961)
Facts:
-Mr. Geoffrey Lee formed Lee’s Air Farming Ltd, a company in New Zealand that
specialized in aerial topdressing (spreading fertilizer by aircraft).
He was:
• The sole director,
• The chief pilot, and
• Held 2999 of the 3000 shares in the company.
-Tragically, Mr. Lee died in a plane crash while piloting for the company.
-His widow, Mrs. Lee, sought compensation under the Workers’ Compensation Act 1922,
claiming her husband was an employee of the company.
Legal Issue:
1. Could Mr. Lee be considered an employee of the company he effectively owned and
controlled, thereby entitling his widow to compensation?
Privy Council Decision:
-The New Zealand Court of Appeal had rejected the claim, arguing that Mr. Lee could not be
both employer and employee.
-The Privy Council overturned that decision, holding:
-A company is a separate legal entity from its shareholders and directors.
-Mr. Lee had entered into a valid contract of employment with the company.
-Therefore, he was an employee, and his widow was entitled to compensation.
-“It is well established that the mere fact that someone is a director of a company is no
impediment to his entering into a contract to serve the company.” — Lord Morris of Borth-y-
Gest
Significance:
Principles of Company Law Page 2
,Significance:
-Reinforces the doctrine from Salomon v Salomon & Co Ltd (1897).
-Clarifies that corporate structure allows individuals to wear multiple hats—owner, director,
employee—without collapsing legal boundaries.
-Frequently cited in cases involving corporate liability, employment rights, and piercing the
corporate veil.
Macuara v Northern Assurance Co Ltd (1925)
Facts:
-Mr. Macaura owned a timber estate and later transferred the timber to a company he had
incorporated—Irish Canadian Sawmills Ltd—in exchange for fully paid shares, making him
the sole shareholder.
-Despite transferring ownership, Macaura took out fire insurance policies in his own name,
not in the company’s name.
-A fire destroyed the timber, and Macaura sought to claim under the insurance policy.
-The insurer, Northern Assurance Co Ltd, refused to pay, arguing that Macaura had no
insurable interest in the timber.
Legal Issue:
1. Did Mr. Macaura have an insurable interest in the timber, even though it was owned by the
company of which he was the sole shareholder
Judgement:
-The House of Lords held that Macaura did not have an insurable interest in the timber.
-Although he was the sole shareholder and major creditor, he had no legal or equitable
ownership of the timber.
-The timber was owned by the company, which was a separate legal entity.
-Therefore, only the company could insure the timber.
-“The corporator even if he holds all the shares is not the corporation… neither he nor any
creditor of the company has any property legal or equitable in the assets of the
corporation.” — Lord Wrenbury
SECT 119 - Company comes into existence on registration
A company comes into existence as a body corporate at the beginning of the day on which it
is registered. The company's name is the name specified in the certificate of registration.
Note: The company remains in existence until it is deregistered (see Chapter 5A).
CORPORATIONS ACT 2001 - SECT 131 Contracts before registration
(1) If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit
of, a company before it is registered, the company becomes bound by the contract and
entitled to its benefit if the company, or a company that is reasonably identifiable with it, is
registered and ratifies the contract:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time--within a reasonable time after the contract is entered into.
(2) The person is liable to pay damages to each other party to the pre - registration contract if
the company is not registered, or the company is registered but does not ratify the contract or
enter into a substitute for it:
(a) within the time agreed to by the parties to the contract; or
(b) if there is no agreed time--within a reasonable time after the contract is entered into.
Principles of Company Law Page 3
, (b) if there is no agreed time--within a reasonable time after the contract is entered into.
The amount that the person is liable to pay to a party is the amount the company would be
liable to pay to the party if the company had ratified the contract and then did not perform it
at all.
(3) If proceedings are brought to recover damages under subsection (2) because the
company is registered but does not ratify the pre - registration contract or enter into a
substitute for it, the court may do anything that it considers appropriate in the circumstances,
including ordering the company to do 1 or more of the following:
(a) pay all or part of the damages that the person is liable to pay;
(b) transfer property that the company received because of the contract to a party to the
contract;
(c) pay an amount to a party to the contract.
(4) If the company ratifies the pre--registration contract but fails to perform all or part of it,
the court may order the person to pay all or part of the damages that the company is ordered
to pay.
CORPORATIONS ACT 2001 - SECT 132 Person may be released from liability but is
not entitled to indemnity
(1) A party to the pre—registration contract may release the person from all or part of their
liability under section 131 to the party by signing a release. (2) Despite any rule of law or
equity, the person does not have any right of indemnity against the company in respect of the
person's liability under this Part. This is so even if the person was acting, or purporting to act,
as trustee for the company.
CORPORATIONS ACT 2001 - SECT 133 This Part replaces other rights and liabilities
This Part replaces any rights or liabilities anyone would otherwise have on the pre--
registration contract.
Piercing the corporate veil
Under common law requires extreme fact patterns:
-Subsidiary treated as an agent of the parent on facts: Smith Stone & Knight
-New Company created to avoid existing legal obligation: Gilford Motor Co Ltd v Horne
-Corporate Group? unlikely per Walker v Wimbourne
-Corporations Act e.g s588G
Relevant cases and legislation explained:
Smith, Stone & Knight Ltd v Birmingham Corporation [1939]
Facts:
-Smith, Stone & Knight Ltd owned a waste paper business in Birmingham.
-The business was operated on land leased by a subsidiary company, Birmingham Waste Co
Ltd.
-Birmingham Corporation compulsorily acquired the land under public powers.
-Smith, Stone & Knight Ltd claimed compensation for disturbance of its business under the
Land Clauses Consolidation Act 1845.
-The Corporation argued that the subsidiary, not the parent company, occupied the land—so
the parent had no right to compensation.
Legal Issue:
1. Could the parent company claim compensation for disturbance even though the subsidiary
held the lease and operated the business?
Principles of Company Law Page 4
