Page 1 Assessment 2, Semester 1 2020, AYN456 Business and C.docx

Assessment 2, Semester 1 2020, AYN456 Business and
Corporations Law
Assessment 2
Semester 1 2020
DUE DATE: Monday 27 April 2020 by 11:59 p.m.
Please Note:
- This is an individual assignment weighted at 20%
- The word count is 1000 words
- Familiarise yourself with the Criteria Sheet (CRA) for further
information on what is required
- You will be marked in accordance with these criteria.
- You must upload your answer via the link provided on the
unit’s Blackboard site under Final
Submission by the due date and time (this applies to On-
campus, Online and External
students).
- Your assignment and feedback will be returned to you online.

- It is each student’s responsibility to check online submissions
have been uploaded correctly
(i.e. you should open the file from Turnitin to check this, once
your files have been
uploaded).
- Each student should check for a digital receipt from Turnitin
at their QUT email address as
proof of submission. This email should be retained until marks
are received. No marks will be
given for submissions where the file is corrupt and unreadable.
Assessment
It is March 2020 and you have been consulted by a friend who
is aware you are taking Business Law.
Before you jump to the problem and issues though, some words
of advice.
The case facts below ask you to read around the relevant areas
in more depth and to work through
what it would mean to successfully apply the relevant law. In
other words, you are asked
• to identify the issues,
• identify the applicable law(s) the fact scenario raises
• state and show how the tests that support each of these areas
of law would be applied to

these facts and
• reach outcomes/conclusions based on this at law – plus
identify commercial advice if
relevant.
Some suggested cases appear at the end of the problem but your
textbook will have more. A good
place to start is looking up these key terms in your book and
reading around them (including more
broadly if needed) – as well as doing some searches around the
cases provided. Reading a full case
can be complex (an important understanding in itself) and a
decent case summary may suffice.
By ‘decent’ however I suggest you will need to have a
reasonably detailed understanding of the facts
and of the elements of the tests the court applied to reach their
final conclusion. You will need to
then ask yourself if the same tests would come out identically in
this case – and why/why not? This
last bit is a critical step to showing you understand how legal
precedent is applied. It is, in other
words, what ‘legal reasoning’ is about.
You should start asap as areas identified will not necessarily be
covered in detail and are designed

to be the basis for applied independent research around legal
issues.
Page 2
Corporations Law
• As the course is only a term, the problem (and course) is
structured for you
o to do preliminary reading
o application and analysis against a real world set of facts
o following up these concepts and processes in the context of
class discussion.
Please take a look at some of the additional information posted
as to getting started for more ideas.
There is also a short clip on doing legal research – although this
will not be overly extensive in this
case with emphasis resting more on application of the cases you
find below, in your text and in class.
Do not get too concerned about how to write your submission.
ILAC/IRAC form is a logical
presentation format that separates out the issues, the relevant
law, and application of that law. In

keeping these areas discrete, it is easier to remain objective
around the first two, and to explain
clearly the pros/cons of the case facts as they align (or don’t
align) with the law. Conclusions then
are the logical final step. See additional information around this
on the assessment page.
This format is used in legal judgments but if you are more
comfortable writing a memorandum of
advice, don’t get unduly hung up on the formalities. The bottom
line is identifying and applying the
law.
• Similarly, use a citation system that is consistent with your
other MBA studies and is easy for
you to apply. If you want to try legal citation, fine but it is not
expected. Any referencing used
however must be consistent and done correctly within the
confines of the (recognised)
system you elect to use.
• Remember – judges do not use textbook authors or quotes
from textbooks as ‘law’ or
authority. Case law (precedent) and statutes are the standard
tool with text citations being
extremely rare and only in exceptional cases. Text books (and
equivalent summaries) are

considered secondary authority – so are descriptive but not ‘ the
law’.
Please
• See the timeline and getting started hints at the end of the
problem as the launching space
• confine your analysis and legal arguments to common law
authority and to such provisions
that arise as part of this course (and text). In other words, do
not attempt to use
landlord/tenancy specific legislation outside the scope of this
course.
Cast of characters:
CommercialMalls Pty Ltd (CM) is the owner of a number of
small shopping malls, including Happy
Home Base.
• Dick – CEO and Executive Director
Gourmando’s Delight (GD), a restaurant that is a tenant of
Commercial Malls’ Happy Home Base
complex.
• Jones – owner of GD

Corporations Law
Leasing Problems at the Happy Home Base
On March 1 2020, Jones, owner of a local restaurant came to see
you. He is very worried about the
lease on his well known restaurant and is seeking your advice
(as he is aware you are doing
business law).
Jones’ restaurant has been an anchor tenant of Commercial
Malls’ Happy Home Base shopping
centre for nearly two decades. His current lease is set to run out
in 2021 and he has just
substantially renovated the restaurant. Not surprisingly, he is
keen to continue on in that location
on favourable terms. On February 1, 2020, Jones emailed Dick
indicating his intention to continue
on in the site post 2021 and raising discussions the two had
around the current lease, making it
clear he considers Dick has a contractual promise of a lease
extension beyond 2021.

Jones was alarmed to get a letter shortly after from Dick not
only indicating that no renewal would
be forth coming but, to the contrary, asserting that as Jones was
in violation of a condition of their
contract, CommercialMalls Pty Ltd was giving Jones notice to
vacate. Under the lease term they
cite, Jones must do so in 21 days with a daily liquidated
damages rate of $10,000 applying to each
day beyond that date. As Jones believes he could not possibly
move out (vacate) in less than a
month – and absolutely does not want to go regardless – he is
concerned as to:
1) Whether Dick’s termination notice is valid
2) Whether, on the facts as set out below, Dick has a contractual
obligation to grant Jones a
renewal extension ‘as promised as part of the 2016 agreement’.
3) What options, including compensation measures, he is either
entitled to recover or may be
at risk of having to pay depending on the legal outcome.
4) The most commercially sensible course of action you would
recommend with reference to
the likely legal outcomes.

Overview:
The background to Jones’ dispute with CommercialMalls (CM)
goes to construction of the terms of
their 2016 contract. Although when he entered the lease in
2001 on an ‘incentivised’ basis, his rent
was $1500/commercial month based on a five year contract
and including 2 renewal options
subject to performance, the rent has crept up slowly since then.
In 2016 Jones and Dick negotiated
an extension at a rental rate of $2700 which includes the clauses
extracted below. Jones is keen to
stay because his restaurant is well known in that venue, the
lease is reasonable and, importantly,
because in line with agreements struck in 2016, he has just put a
lot of money into renovating the
premises.
_____________________________________________________
_____________
Facts:
CommercialMalls Pty Ltd (CM) owns Happy Home Base
(HHB), where Jones’ restaurant, Gourmands’
Delight, is situated. Built a couple of decades earlier, by 2015,
Happy Home Base was looking a bit

tired and had the ‘vibe’ of a complex that had seen (much)
better times. Business and revenue lines
had fallen and, to make matters worse, a new competitor, Flashy
Home Base (FHB), had opened
across the road. Flashy’s new stores, stylish architecture and $5
lunches in their food court
generated a booming business (for Flashy) and was taking a
serious toll on HHB.
Page 4
Corporations Law
CM’s CEO and Managing director, Dick, and the CM Board
decided in 2014 that things had to
change. Key to this strategy was the need for a substantial
upgrade. Dick believed that in particular
Gourmando’s Delight (GD), the mall’s restaurant, needed to be
refreshed to lure back lunch and
dinner trade. GD’s dated décor, shabby crockery & cutlery, and
$35 lunches were all out of step with
customer expectations.
GD’s most recent lease was set to expire in February 2016.
GD’s owner, Jones, had made it clear he

wanted an extension with subsequent renewal options. Dick
believed the 2015/6 upcoming renewal
discussions were therefore optimally timed to procure Jones’
agreement, as part of the contract, to
perform significant renovations. The parties did indeed reach
agreement, signed a lease and have
been doing business since that point. The 2016 lease expires on
1 March 2021.
Both sides (Dick and Jones) have good recall of the events
surrounding the 2016 lease negotiations
and agreement. Both agree that all facts below represent an
accurate narrative of events leading up
to and around it.
Lead up to the 2016 Lease
On 1 November 2015 Dick reminded Jones his lease was due to
expire on 28 February 2016 and
indicated that he would be keen to see an upgrade of the
premises as part of this agreement.
On 1 December 2015, Dick emailed Jones a new lease for a
fixed 5-year period. The new lease
included the clauses below, but had no renewal options:
_____________________________________________________
____________________________

15.1 Procedure for post-expiry arrangements
CommercialMalls Pty Ltd will give at least 3 months’ notice to
Tenant prior to expiration of the lease
stating whether:
• (a) the Landlord will renew this Lease for a subsequent 3 year
extension with a renewal right on
the same terms as this provision and subject to such lease rates
as the tenant and Landlord shall
mutually agree upon at that time; or
• (b)the Landlord will allow the Tenant to occupy the Premises
on a monthly tenancy after Expiry;
or
• (c) the Landlord will require the Tenant to vacate the Premises
by the Expiry Date.
29.1 Refurbishment
(a) A major Refurbishment1 of the Premises must be undertaken
by the Tenant;
(b) The Refurbishment must be complete and the premises ready
to open for trade not more than 3
months from commencement of this lease (“Reopen Date”); and
(c) Time is of the essence in relation to the Reopen Date. If the
Tenant fails to complete the

Refurbishment by the Reopen Date, CommercialMall shall have
a right, exercisable at its discretion, to
terminate this lease and require the Tenant vacate the premises
within 21 days.”
(d) Failure to vacate the premises in a timely manner under
clause c above shall attract a liquidated
damages charge of $10,000 per day.
Page 5
Corporations Law
On 3 January 2016, Jones emailed back:
“Thanks - your draft lease has been received. My solicitor
however says as there is no renewal clause
options beyond 2021 it isn’t worth signing. You don’t want to
lose me!”
Jones however most certainly didn’t want to move, having just
installed expensive kitchen
equipment, so he added:
“But I like CM and you are a good guy to deal with, Dick, so

I’ll think about it.”
Dick, like Jones, was nervous as he did not want to lose Jones’
well known restaurant which was a
significant draw card for the shopping center. GD’s CardiaQ
Arrest signature dish of a steak filet
encrusted in a double fried camembert and bacon wrapping was
a crowd pleaser and the Straight to
the Promised Land cheesecake - iconic.
On 1 February 2016, Jones emailed:
“Dick, I can’t agree to this lease without a commitment from
CM Pty Ltd to a renewal for a further 5-
year term, especially if I have to do a refurbishment.”
On 14 February 2016, Dick emailed back:
“I refer to your email of 1 February and your subsequent
telephone call yesterday to the same effect.
Unfortunately, I confirm again this is a Board-level decision.
CM’s policy is that it will not confer a
right to renew in any new retail food tenancies it owns, yours
included.”
Jones later called Dick on 16 February 2016:
“You know I’m a major draw-card for the centre? You need me.
I need that further 5-year term.”

After a lengthy pause, Dick said, “Jonesy, Jonesy…mate, you
know CM…we’ll look after you at
renewal time.”
Jones attended CM’s office on 25 February 2016. Dick, CM’s
Solicitor, CM’s Bank Manager and
several CM Board members were also in attendance. Jones said
to Dick, “You know, I need that extra
5-years …” Dick replied “Jonsey, We’ll look after you at
renewal time.”
Jones signed the lease.
Jones redesigned the restaurant space and ordered expensive
furnishing, cutlery and artwork from
Italy. However, the container ship carrying the order sank
shortly after leaving Italy - meaning the
order was not able to be delivered on time.
Frantically Jones ordered replacements for the lost items but
they the soonest they could be
installed meant there would be delay of a week beyond the lease
nominated deadline for reopening
– a fact Jones communicated to Dick by email on 30 May 2016.
The deadline came and went, with the restaurant successfully
re-opening on 5 June 2016. Jones this
time around introduced a different business model that

emphasised cheaper meals with high
turnover. Customers who had gone across the street to eat
returned and revenue improved both for
Jones and CM.
Three years on from the re-opening (2019), however, Jones
elected to return to a high end/high
price menu. On 1 April 2019 he changed to an all-new menu,
with no lunch option cheaper than $50.
Patronage dropped away markedly and reviews were awful but
Jones felt he was on the right track
Page 6
Corporations Law
and should persevere. In December 2019, Jones emailed Dick to
remind him that lease renewal was
expected and would be upcoming in 2021.
Due to Jones’ restaurant changes, however, patronage of CM
had again dropped away, with
customers heading across the road to the competitor’s food
court. In the wake of a record low
holiday season revenue outcome, on 28 February 2020 Dick
emailed Jones, “we note that after your

refurbishment, you failed to reopen on the Reopen Date. Given
this failure, we hereby terminate this
Lease in accordance with clause 29.1(c). Please deliver up
vacant possession in 21 days. We will seek
to enforce all damages arising beyond that point as agreed in
clause 29.1(d).
Jones was furious and argued with Dick, demanding he be able
to stay and threatening to sue for
breach of the lease and agreement terms. Dick indicated he
wanted Jones gone and, in line with the
terms in the lease, considered that he had given Jones full and
proper notice. It was his intention,
Dick further added, that should Jones not comply, CM would
enforce the contract terms to the full
extent including the liquidated damages clause and other
measures under 29(1)D.
Jones has sought your advice. Jones believes GD/Jones have
claims for:
• 1) A five year extension and damages for emotional distress,
stress and suffering around this
transaction.
• 2) in the alternative, full damages suffered due to wrongful
breach by CM including for stress

and emotional trauma around the experience and penalties for
breach of good faith.
• 3) An order for a further 5-year lease on existing terms for the
five year period or damages in
lieu if such is not viable.
CM/Dick has indicated (in heated arguments) that they will
counterclaim:
• 1) For damages due to late departure of 10 days ($100,000) if
Jones does not move out until
1 April 2020 which Jones indicated to Dick is the soonest viable
departure date that Jones
can exit and
• 2) a declaration that its exercise of rights under clause 29.1(c)
was valid. It denies the further
lease.
The Task
Please advise Jones as to his likely best commercial option
going forward. This should include at a
minimum reference to:
• his likely legal position (highlighting the relevant legal
principles and law that arise under
these facts)

• the legal consequences and risks Jones faces going forward if
he ignores the termination
notice and goes beyond the 21 days to vacate and/or doesn’t exit
until 1 April 2020.
• what legal remedies he is most likely to be entitled to on these
facts
• whether Jones can claim for a further 5 year lease on existing
terms for the five year period
• recommendation of a commercially sensible course of action
___________________________________________________
Page 7
Corporations Law
Getting Started:
For the avoidance of doubt, please ignore any real (or imagined)
issues re:
• landlord/tenancy, Qld real estate or other equivalencies
• Agency – assume this not to be at issue on these facts

• Any formalities for executing the existing lease- assume all
steps were fully compliant
Focus primarily on the major issues that may be relevant to this
including
breach, estoppel, certainty, collateral contracts, termination,
damages and liquidated
damages, good faith.
In preparing, you can read the materials on estoppel and
termination for breach, and (at least)
summaries of the following
Waltons Stores v Maher (esp Brennan J) (1988); • Sargent v
ASL; • Austotel v Franklins (note in particular
views by Kirby P, Rogers AJA); • Crown Melbourne Ltd v
Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26;
Hadley v Baxendale et al.
Citation Style
Formal legal citation form is not required unless you elect to
use it (information around this are
contained in more detail on the assessment 2 page). It is
acceptable to use a standard form of
citations standardly recognised in Business programs. You
should, however, ensure the citation

system elected is well known and used correctly. Consistency
and legitimacy will be essential
however.
Table 1: A chronological overview of events
March 1 2016 Start date of the lease (signed 25 February 2016)
May 30, 2016 Notification email from Jones to Dick’s Office,
no acknowledgment or reply
received from Dick
June 1, 2016 Contract-specified reopening date
June 5, 2016 Jones reopens
28 February, 2020 Dick emails Jones termination as per cl
29(1)(D)
(21 Dec 2019 Jones queries renewal)
21 March, 2020 Clause 29 deadline for Jones to vacate the
premises
1 April 2020 Jones’ soonest viable departure date
1 December 2021 Final day for Dick to notify Jones of what his
options would be for end of lease
1 March, 2021 Scheduled end of lease (renewal of new lease to
go in to operation)
- December 2019 – Jones to Dick: lease renewal – request for

confirmation
- 28 February 2020 - Dick to Jones email: termination as per
29(1)(D).
Janet Eltzroth
ThursdayApr 30 at 11:15am
Manage Discussion Entry
The manager is sensing the store manager 9 is creating trouble
with the stores they are in. In store 6 they obviously used all of
the budget for advertising for the first few months they were
there and then when they got moved there had been no
advertising done so it sets this store up to have to spend more to
get customers in store 6. Store 9 cannot go on without spending
on training because it will negatively impact the store not only
now but also long into the future. This manager is very
unethical. Our book talks about ethics in chapter 1.2 how the
unethical behaviors as managers. (2017, Schneider). Part of that
unethical behavior is by not spending anything with the budget
in turn making it look as the store is profitable when in reality
the manager is not doing anything to help the store because they
think if there is more budget left they will look as though the
store is more profitable and that making their bonus bigger and
that is unethical.
Not having community involvement does have a large impact on
the stores overall. Since the manger pulled out of store 6
community involvement it has had a large impact on the overall
store traffic which has had a decline in sales. In our store we
take donations for our firefighters for the summer and the
community knows this is coming and they will intentionally
come in to the store and donate Gatorade and water for our
firefighters. If that stops it is going to impact the community
and they will not want to be in our store as much which will

impact sales. So it is right for the regional manager to have
concerns with this manager especially if there is a trail of
problems that are following this manager
Schneider, A. (2017). Managerial accounting: decision making
for the service and manufacturing sectors (2nd ed.) [Electronic
version]. Retrieved from https://content.ashford.edu/
Christian Argueta
ThursdayApr 30 at 11:51am
The manager of store nine must be an exceptional employee to
have successfully managed other profitable stores in the past
and approaching a promotion to a larger store. However, Zoya
does have her reason to sense otherwise considering all
scenarios. The first noticeable factor is that store 9 has almost
no personnel training expenses when compared to 14 other
stores, which can mean that the store manager trains individuals
based on their own experience and knowledge which translates
to staff being dependent on managers as opposed to training
them and making them independent and more self-sustained.
This can become problematic at a larger store if employees have
questions or need help and this manager is on vacation, sick, or
simply enjoying a day off. Training employees on decision
making and ethical practices is critical for the business in order
to ensure rules and regulations are being enforced and followed
by everyone including the manager. Another noticeable concern
is that store 9 has stopped participating in several community
events which are intended to give them more exposure and bring
in more business to drive up revenue as opposed to incurring
more expenses. When comparing store 6 to store 9 Zoya should
question what they are doing wrong now and what the store
manager was doing right in order to keep operating expenses
low and profits high. Budgeting is important when it comes to
advertising, in addition most successful stores have advertising
throughout the year to attract and retain new and existing

customers. Zoya has reason to question why these expenses are
being spent in the first quarter as opposed to throughout the
year because she has an ethical responsibility to question and
observe managers who are practicing unethical behaviors,
especially before putting them into a bigger store with more
responsibility. As a regional manager she has several stores and
managers to keep an eye on and ensure they are following all
rules and regulations while making ethical decisions in stores.
In other words, she has the last say on if the manager should get
this new store or not based on what she sees and how she feels.
Promoting someone who does not deserve it can also ruin her
reputation and lead to her being looked at differently by her
peers.
Reference
Schneider, A. (2017). Managerial Accounting: Decision making
version]. Retrieved from https://content.ashford.ed
Deontray Johnson
ThursdayApr 30 at 5:55pm
Greetings all,
According to our text, a variable cost is a cost that does not
have a set price and a fixed cost would be completely the
opposite (2017, Schneider). When reading the introduction to
chapter two, What Is the Cost of a Brake Job, Greg is looking
for a way to have cost in a database or system that will allow
him the ability to give a direct price for parts and service. In
most applications shops go by rates, which is a variable because
all jobs do not weigh the same in the amount of time it takes to
complete a job. Parts are also not the same price year-round
either. The wage would also fluctuate according to the
mechanic's work schedule. In the given scenario, it is a task to
forecast the cost of goods and services being sold or produced.
In the manufacturing realm, if a company, Lighting, sells street
light fixtures to a company based on the current price of steel

only to fund out that the price of steel increases due to tariffs,
this would be a variable on two ends. To ensure the profits for
the company are profitable the fixture will have to be either
produced fast or with less manpower to help offset the cost of
the product being made. In this case, it is better to price on-
demand or buy in bulk, which raises the inventor cost and most
companies do not want inventory cost to be high.
In reference to Judy's statement, when thinking about a
manufacturing company that is paying lease/rent to use a
building, this should be considered a fixed cost, meaning that
the price does not fluctuate. Having been in a rental building for
church the note a month was around 1,400 and each quarter of
the month, the bill would escalate higher to cover any misc fees,
such as damage to the building, garbage disposal, and
insurance. You would think that this would all be added into the
primary note and divided over the course of a year, but it
wasn't. Even though the lease was a set price, it had the ability
to fluctuate.
In reference to a variable cost we expect to see bills such as
phone, cable, internet, utilities to vary each month or within a
yearly budget, but in most cases, some bills remain the same
throughout the contract. Currently, we use an internet service
that has the power to flex but it has been the same for the past
years. Most companies set budgets on what will be spent over
the course of the year with the intent not to exceed the budget.
Reference:
Randi Slaughter
ThursdayApr 30 at 6:21pm
A controller is responsible for managing the entire accounting
side of a company (Schneider, 2017). The controller provides

the answers to a managerial accountant’s questions and report
needs. These answers and reports help assess the viability of a
business. When understanding these reports, a managerial
accountant can determine the impact a cost driver has on a cost,
or the cost behavior. Two types of costs are: variable costs and
fixed costs. Variable costs will change in direct proportion to
changes in the level of activity or output. Fixed costs do not
fluctuate regardless of what happens. When Judy Koch says
that she rarely sees a real variable cost or truly fixed cost it is
because fixed and variable costs can be changed by management
action. This action then changes the cost behavior of certain
activities.
Looking at an annual event my company puts on there are both
variable costs and fixed costs associated with the event. Since
variable costs increase or decrease in tandem with sales activity
or production volume, an example would be food or drink costs
since they are determined by the changing number of attendees.
Likewise, print material would also be a variable cost because it
changes with the amount of invitations deemed appropriate to
mail out. However, what will not change and is a fixed cost is
the venue price, a performer's fee, and other finalized
contracts.

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