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QUESTION

Leroy is considering starting a catering business. Leroy has three children (aged 3, 16 and 21) and is married to Melanie.

1.   Leroy is considering starting a catering business. Leroy has three children (aged 3, 16 and 21) and is married to Melanie. 

The proposed business will cater to high end corporate clients and wealthy individuals. In order to have the ability to cater events for these clients, Leroy needs approximately $4 million of capital.  Leroy intends to invest the $2 million into the enterprise from his own funds and get the balance from third party sources. 

Leroy wants to have his wife and children involved in the business as well.

Advise Leroy.

2.   Jenna, Koda and Lula decide to start a business baking expensive wedding cakes. Jenna and Koda will each invest $10,000 in the business. While they don't want to participate in the day-to-day running of the business they still want to have an active role in management.  Lula has no money to invest, but she has years of experience baking cakes.

Lula's son, Asa, also wants to invest $50,000 in the business. He wants to have a steady income from his investment. While he does not want to be involved in the management of the company, he still wants to have some ability to direct how his $50,000 investment is spent.

What legal structure would you advise for their project: a partnership, an incorporated association, a company (if a company, provide details on the type of company) or some other structure? Why would you recommend this structure - provide details? 

3.   Jacob and Marley are avid tennis players and decided to form a club called the Burleigh Breakers Tennis Club. Jacob becomes the president and Marley the secretary. Malcolm, Jason and Alex and ten other people join the club as members. Each member pays a membership fee of $100.

The club organizes a tournament and all the members are invited to participate. At the tournament, the club supplies sports drinks to the players. Unfortunately the drinks contain a contaminate and many players fall ill. It turns out that in order to save money, the club had purchased the drinks at a discount as they been recalled due to bacteria been found in some bottles.

Can the ill players bring an action in negligence against the club? If not, what remedy do they have? What would you have recommended Jacob and Marley to do differently when forming the club?

4.   John is a foreign exchange trader working for a large bank. John and twenty five of his fellow workmates decide to leave the bank and start their own foreign exchange trading firm. They decide to operate as a partnership. Do you think this is a good structure for the business?  

5.   Darryl and Julia are both passionate chess players. They meet for the first time at a recent chess tournament. After a short discussion about their love of chess, they decide they should open a chess store together selling exotic chess products to other likeminded chess fanatics. Unfortunately, neither Darryl nor Julia has any money. Julia's friend, Otis, told Julia he had saved some money and was looking to invest it in a business. Julia and Darryl approach Otis and pitch their chess store idea. Otis is completely blown away by the pair's enthusiasm for the idea and agrees to invest $100,000. The three agree that Otis will not receive any interest on his investment, but will get 50% of the net profits generated by the business.

Darryl is given the responsibility of finding a suitable location for the business. He finds a store in Burleigh Heads and promptly enters into a lease. As Julia is out of town on business, Darryl signs the lease in his name. Darryl engages a firm of architects to prepare designs for the store.

When Julia returns, she is told about the new premises. She takes her good friend Glenda to check out the new premises. When they enter the store, Glenda trips over a broom that was left lying on the floor and severely injures her leg.

Julia is horrified by the new premises. She doesn't like the location, it is too dark and it is too expensive. She tells Darryl that the whole chess store idea just won't work and she has no interest in perusing the venture any further.

Who is liable for the lease obligations, the architects' fees and Glenda's injuries?

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