Question 1

Jak has worked as a successful accountant for several years since graduating with a double major in finance and accounting. He is 28 years old and is looking to start his own accounting practice in Parap, Northern

Territory. He has saved up a substantial amount of capital. However, he will still need to borrow $25,000 to finalise the arrangements. He has no assets and cannot obtain a loan without a guarantor. Jak consults his elderly parents, who grew up in Australia. He tells them he has a fantastic idea and that he needs their help. Jak's parents have always been very proud of him and think his plans are fantastic. Jak tells his parents he needs only $25,000 and this will be repaid within 6 months, after which time they would be under no further liability. Arrangements are made for a bank manager to visit Jak's parents and they both sign as guarantor for Jak. However, the agreement they sign is one for an infinite credit limit over an unlimited period.

Jak's parents do not have $25,000 readily available to repay the loan and they fear losing their family home. They seek your advice.

Question 2

Fern goes to the doctor complaining of stomach cramps and general malaise. The doctor prescribes antacid and bed rest. Fern, who had, in fact, accidentally ingested rat poison, subsequently dies.

Is the doctor liable for negligence? Use relevant cases to support the elements of the tort of negligence.

Question 3

Cooper, the general manager of a courier business, is on holiday in Sydney. He ran out of money. He telephones Bob, the most knowledgeable, experienced and trusted courier. Cooper asks Bob to sell an old computer for at least $600 and deposit the money to Cooper's bank account. The next day, Cooper was surprised to find that only $250 was deposited into his account. He telephones Bob. Bob is not answering. Bob calls back later and explains that he sold the computer to his best friend and could not "rip him off" by charging $600. Cooper is furious.

Advise Cooper if Bob is liable for the balance of the money and if so on what grounds? Your answer must refer to relevant agency case law.

Question 4

Rupali is a champion ice skater who has retired from professional sport, she is now interested in using her considerable savings (from her winnings and professional fees) to purchase a business. Rupali is interested in purchasing a suburban ice skating rink and she begins negotiations with the proprietor for a sale. The owner assures Rupali that the business grosses more than $5,000 per week with overheads of only $2,000 per week. Rupali has never owned a business before and does understand accounting, but she is convinced when shown the books that the business is making considerable profits. Rupali purchases the business and soon discovers that the business has overheads of $2,000 which are the fixed overheads, not the current overheads which considerably wipe out any potential profit. The vendor had shown her only parts of the accounts and seems to have kept from her the actual profits per week.

What rights might Rupali have once she discovers the true state of the business?

Question 5

Viva and Lily are partners in a nail and beauty shop in Casuarina. They have five employees working for the business. The shop is located in Casuarina Square and is leased. The business is doing well and has been profitable for them. An opportunity has arisen to expand the business into Palmerston and Darwin City. Viva and Lily are keen to expand their business, but they will need a significant amount of funds to lease and fit-out two more premises and employ approximately 10 more staff, as well as a manager for at least one of the other shops. Viva is concerned about her potential liability for the debts and liabilities of the partnership. Also, she is concerned about the future of the business if one of them should decide to leave, as the current lease and future leases will be in both of their names.

Advise Viva on the advantages and disadvantages of incorporating, compared to a partnership structure.