QUESTION 1.

Van Le recently arrived in Australia from Vietnam. She likes to practise her English by
watching TV and she especially likes watching fitness and exercise programs. She
realises the importance of getting fit so she decides to buy an exercise bike from
Rabble Sports after seeing some advertisements. She especially wants to see the
model called Michelles No 1 Choice Bike, apparently referring to Michelle Stynes, one
of the television programs gym instructors. A photo of her at the gym on the bike is
used on the poster advertising the bike.
Van Le approaches the sales assistant, Jennifer, and asks whether the No. 1 Choice
model would suit her needs. Jennifer immediately realises that Van Le is very
unconfident and obviously knows nothing about exercise bikes. She says that the
model would probably be suitable for her but because of the specialised nature of the
bike, it would be advisable for her to visit her home to demonstrate its features. Van
agrees.
Jennifer arrives at Van Les apartment and begins a sales pitch designed to persuade
Van of the benefits of the upgraded Michelles No 1 Professionals Choice model and
its suitability for her needs. Van is finally convinced and signs a contract to purchase
the bike for $1300.
Three weeks later Van Le sees a similar bike advertised at half the price and also
realises from an item in the newspaper that Michelle does not, in fact, endorse the
bike at all. Furthermore the upgraded bike is more suited to an elite athlete. It has
every possible extra feature, none of which Van Le requires at this point in her life.
When she learns that, although the bike is new, it is last years model, she decides she
wants to rescind the contract and get her money back.
(a) Advise Van Le and Rabble of their rights and obligations under the ACL. (12
marks)
(b) Assume for the purposes of part (b) only, that Van Le is badly injured when her foot
gets stuck in the pedal. The injury is directly caused by Van Les inability to control
the powerful bike. When she informs Rabble that she intends suing for a breach of the
consumer guarantees, they point to a term in the contract that limits the purchasers
right to sue the supplier for any losses for death or personal injury in relation to the
use of the bike. Advise Van Le whether this clause is valid under the ACL. (3 marks)
QUESTION 2.
(a) Alton, a partner with an auditing firm, completed the audit for Greenfields Ltd and
announced that the financial statements were an accurate reflection of Greenfields
financial position. At that time, Alton knew that Petrus Ltd was about to purchase
Greenfields because Cynthia, the managing director of Petrus and a personal friend of
his, told him about it. However the board of directors of Petrus had not made any
public announcements of their intentions to this effect. Cynthia told Alton about it as
she wanted his opinion as to whether she should purchase shares in Greenfields Ltd
after Petrus purchased it as part of a long-term investment plan. Alton informed her
that, based on Greenfields financial statements, it was a sound long-term investment.
Petrus Ltd purchased Greenfields after reading the audit report prepared by Alton but
within a few months they discovered that Greenfields financial statements were
wrong. Alton had failed to take into account a large unsecured loan that had to be
written off. The result was that the balance sheet overstated assets by $10 million. As
a result Greenfields was in a poor financial position and Petrus lost most of its
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investment. Cynthia who had purchased shares in Greenfields after her discussion with
Alton lost her investment.
Advise Petrus and Cynthia whether Alton owes each of them a duty of care.
marks)

(b)

(10

ABC News: April 23 2013 Royal Children's Hospital settles meningococcal case
Melbourne's Royal Children's Hospital has settled a negligence case
brought by a nine-year-old girl.
The hospital was being sued after a doctor employed by the hospital failed to
correctly diagnose meningococcal disease when Venice Kowalczyk was nine
months old in 2004. When nine-month-old Venice Kowalczyk was admitted to
the Royal Children's Hospital, there were significant warning signs to indicate
she had a serious bacterial infection, a court has heard. Venice's father, Danny,
had earlier asked hospital registrar Dr Tanya Moyle to test his daughter for
meningococcal disease, but Dr Moyle replied, "I don't think it's that serious", the
court has heard. A blood test was never taken and Venice's parents were told to
go home and give their child another dose of painkillers after four hours if she
had not settled. Mr Kowalczyk and his wife, Nadia, later rushed their seriously ill
daughter back to the hospital, where she was diagnosed with the deadly
meningococcal septicaemia. Venice spent five days in the intensive care unit as
doctors fought to save her life and later had to have her feet, left hand and the
tips of three fingers on her right hand amputated.

Assume a duty of care is owed by the hospital and assume the damages are agreed
upon. The only issue is whether there has been a breach of the duty of care. You are
asked to advise the plaintiff whether there has been a breach of the duty of care. On
the basis of the above facts, discuss whether there has been a breach of the duty of
care. (5 mark
QUESTION 3.
Mike and Raj decide to open a shop that sells takeaway Indian food. They call it Curry
in a Hurry. They agree that Raj is to be the chef and will be solely responsible in this
area. Mike is to take on a management role and be responsible for buying utensils,
kitchen products and groceries and storing and packaging of food products. Janice, a
friend of Mike and Raj, has agreed to help them financially with the starting of the
business by lending them $15,000, provided she is repaid out of the profits for the
next two years.
In April of this year Raj visits his friend Jake who owns a shop in the city called Kitchen
King. Jake shows him one of his new products, COOKTEC, that costs $9000. COOKTEC
can do almost everything in the kitchen, from peeling and chopping onions to blending
purees, grinding spices and even cooking. Raj likes the product and decides to buy it
for the shop. Jake tells Raj he has a special Mothers Day offer on that day - a 10%
discount (which he would give Raj personally as an incentive if he buys the COOKTEC).
Raj is happy with the price and immediately agrees to buy it. Jake gives him the $900
incentive payment in cash. When the invoice arrives at the restaurant, Mike is very
angry that Raj has bought such an expensive product without discussing the purchase
with him and refuses to pay on the invoice.
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At around the same time, Ashton has recently complained that the food he ordered
from Curry in a Hurry has caused him severe gastroenteritis, leaving him unable to
work for several weeks. Tests have shown that the campylobacter bacteria was in the
paneer (cheese) probably because it had not been stored at a proper temperature. It
is true that on one occasion during a recent hot spell Mike forgot to put the paneer in
the fridge. Ashton sues Mike, Raj and Janice for negligence, seeking damages to cover
the medical expenses, lost wages and pain and suffering.
a) Is there a partnership between Mike, Raj and Janice? (4 marks)
b) Assuming for the purposes of (b) only that a partnership exists, who is liable to
pay for the COOKTEC? (4 marks)
c) Mike has no money or assets. Advise Ashton whether he can successfully sue
either Raj and/or Janice. (4 marks)
d) Is Raj entitled to retain the incentive payment? (3 marks)
Refer to relevant sections of the legislation and appropriate cases to support your
arguments.
QUESTION 4.
Hickory Ltd, a publicly listed company, is a property developer specialising in office
buildings in the central business district. It has three directors - Alison (managing
director), Bruno (finance director) and Harrison (chairman). Several months ago, the
board approved Alisons proposal that the company acquire a site in the Docklands
precinct for $60 million from Longreach Pty Ltd. Longreach Pty Ltd is a company
controlled by Alison and her family. Alison told the board that in her opinion the site
was suitable for a 50 story office building but did not disclose her interest in Longreach
Pty Ltd.
Unfortunately, Alison was unaware that the planning laws did not permit the
construction of a building of more than 25 stories on the site. The board relied on
information provided by Bruno in a short presentation that the project would be highly
profitable and how the proposed acquisition and development could be funded but
these details were vague and brief. Bruno was also unaware of the relevant planning
laws.
The Docklands project proved to be a financial disaster for Hickory Ltd as it paid too
much for the site and the costs of borrowing were much greater than Bruno had
indicated. The financial viability of the project was adversely affected because the
height of the office building had to be scaled back from 50 to 25 floors. As a result, the
anticipated losses from this project are likely to exceed $100 million.
Please advise:
(a)
Whether Hickory Ltd.s directors breached their statutory duties in relation to
the purchase of the Docklands site. In your advice consider any relevant defences. (7
marks)
(b)
Whether Alison contravened any provisions of the Corporations Act in relation to
the deal with Longreach. Advise on the possible sanctions. (8 marks)