Question 15

ISSUE
Whether the contract formed for the sale of a multimedia projector between Jason and Tobago
Bureau of Road Repairs is valid because of an error by one party.
LAW/RULE
Invitation to treat
- Tenders
A party is only being invited to make a bid which constitutes the offer and the party issuing the
invitation is merely seeking offers. The invitation for tenders may be regarded either as an offer
or as an invitation to submit offers coupled with an undertaking to accept the highest or lowest
offer. The contract is concluded upon communication of the relevant offer. In the case of Zephyr
Services Limited v. Ministry of Forestry Fisheries and Sustainable Development and the
Attorney General, the defendant tendered an advertised consultancy in which the claimant put in
the highest bid which was first accepted but later rejected by the defendant. Since there was a
clear invitation to treat, acceptance, consideration, and intentions to create legal relations, the
court concluded that the contract should be awarded to the claimant.
Contract
A contract is an agreement, either written or oral, by which two or more parties having legal
capacity agree with sufficient certainty in accordance with terms and conditions that are express
or implied to perform certain obligations that are not contrary to law or public policy. In the case
of Visual Arts Production Limited v. Marcus Jean Baptiste, the claimant offered to sell the
disputed items to the defendant for $10,000. The negotiations were carried out orally and as
such, the defendant can either purchase or return the items. Since they were already using the
items, the court therefore noted that an oral contract was formed since an offer was made and
accepted through conduct of the defendant.
Acceptance
An acceptance is a final and unqualified expression of assent to the terms of the offer. An
acceptance can be communicated to the offeror orally or in writing. In the case Bougainville
Investment Corp. v. Semple, Mr. Semple claims that no legally binding agreement to pay
Bougainville a sum of money, this is because although he offered to make payment, no
acceptance was indicated by Bougainville. Therefore, since an offer was made without
acceptance, no contract existed.

Consideration
Consideration concentrates on the requirement that something of value must be given and
accordingly states that consideration is either some detriment to the promise or some benefit to
the promisor. In the case of National Insurance Board v. Ann Marie Duncan-Mason and Peter
Mason, both offer, and acceptance were noted between the appellant and the respondent with
regards to the sale of the property held pursuant to the mortgage deed and the proceedings would
be paid towards the mortgage. However, the agreement lacked consideration therefore, it is not
legally enforceable.
Intentions to create legal relations
- Commercial Agreements
If a party intends to create legal intentions, it means that he or is intends or wishes to enter into a
legally binding agreement. The court establishes the intention to create legal relations based on
the facts and evidence provided. In commercial transactions, businesses should produce drafts of
the proposed agreement called “Subject to Contract” or “Letter of Intent”. In the situation where
the terms of the Subject to Contract are carried out before the official contract is created, the
court would have to carefully examine the evidence to determine whether the parties intended to
create legal relations. Once the court determines that an intention to create legal relations exists,
it would be concluded that a contract existed, and all parties involved are bound by law. In the
case of the Estate of Raphael Williams, Deceased, Cliff Williams and Aggie Williams v The
Mooring Limited, the claimants representing the deceased and the defendant entered into an
agreement for the defendant to pay $420,693.95 in fees outstanding to the deceased. In such
agreement, the parties all agreed on the terms and conditions of the agreement, therefore an offer,
acceptance as well as consideration were present. There was also no indication in the agreement
made that any of the parties wanted to make any further negotiations, therefore the parties
entered into the agreement with the intention of being legally bound, hence, the court decided
that there was intention to create legal relations.
Mistake
- Unilateral mistake
A party who has entered into a contract under a serious mistake about its contents in relation to a
fundamental term will be entitled in equity to an order rescinding the contract. This applies
where the other party is aware that the first party is entering the contract under some serious
mistake or misapprehension about either the content or subject matter of that term and
deliberately sets out to ensure that the first party does not become aware of this mistake. In the
case of Bernadette Liddie and Bernard Liddie, where they signed a contract about enquiring a
loan from the bank. The terms of the contract stated that the instalments would last for 60
months, however, coming close to the end of the 60 months, the bank noticed that it had made a
mistake in the terms of the contract. The instalments were supposed to last for 66 months and not
60. Since this was a mistake on only the Banks’s behalf, it is considered a unilateral mistake. The
court decided that it would be unfair if the Liddies had to pay instalments for 6 additional
months, therefore, the appeal was allowed.
ANALYSIS
In this situation, an auction was held by the Trinidad and Tobago Bureau of Road Repairs. This
can be considered as an invitation to treat since the items would be sold to whoever is the highest
bidder or offeror. Jason M’ngohead attended the auction with the intention of purchasing a five-
year-old multimedia projector where he noticed that the projector being sold was not five years
old, but instead two years old which was unknown to the Trinidad and Tobago Bureau of Road
Repairs. As a result, Jason successfully placed the highest bid of $15,000 for the projector which
was in line with the price for a five year old projector. A formal contract was therefore formed as
the elements of offer, acceptance and consideration was present between both parties. Intentions
to create legal relations was also present since neither of the parties did not attempt to make any
further negotiations.
After two days, Jason received a letter demanding that he returned the projector since it was sold
to him on error. This was a unilateral mistake on behalf of the Trinidad and Tobago Bureau of
Road Repairs and if they were to pursue legal relations, the court can decide to disseminate the
contract since the projector was sold by mistake and under value, leaving Jason without a
multimedia projector.
CONCLUSION
I would advise Jason to willingly comply with the letter and return the projector and accept the
five years old projector he was initially going to purchase. This would allow him to avoid any
unwanted legal proceedings which can lead to a greater loss in the long run where he may have
to provide equity to the other party.

Question 21

ISSUE
Whether the contract formed between Rajin and Mag Ga was valid
LAW/RULE
Contract
A contract is an agreement, either written or oral, by which two or more parties having legal
capacity agree with sufficient certainty in accordance with terms and conditions that are express
or implied to perform certain obligations that are not contrary to law or public policy. In the case
of Visual Arts Production Limited v. Marcus Jean Baptiste, the claimant offered to sell the
disputed items to the defendant for $10,000. The negotiations were carried out orally and as
such, the defendant can either purchase or return the items. Since they were already using the
items, the court therefore noted that an oral contract was formed since an offer was made and
accepted through conduct of the defendant.
Offer
An offer is an expression of willingness to contract on specified terms, made with the intention
that it shall become binding on the person making it as soon as it is accepted by the person to
whom it is addressed. In the case of Storer v. Manchester City Council, the council forwarded a
form of agreement for sale to the tenant which he should sign as an indication of his acceptance.
The court held that an offer was contained in the town clerk’s letter which included the
agreement, and the acceptance was made when Storer signed and returned the form.
Counter- offer
It is a principle that a counter- offer may constitute a rejection of the offer and terminate it so that
it is no longer open for acceptance. When a person makes an offer and the person to whom the
offer is made responds by proposing changes to the terms of the offer, the law considers the
response of that party not as an acceptance but rather as a counter- offer. In the case of Publity
AG v. Chesterhill Properties Limited, the posted tenancy agreement was printed, signed, and
posted. However, it did not create a binding agreement because all that time there was no offer
by Chesterhill for Publity to accept as that offer had been rejected. This amounted to a counter-
offer and rejection of the ‘trustees signed agreement’.
Acceptance
An acceptance is a final and unqualified expression of assent to the terms of the offer. An
acceptance can be communicated to the offeror orally or in writing. In the case Bougainville
Investment Corp. v. Semple, Mr. Semple claims that no legally binding agreement to pay
Bougainville a sum of money, this is because although he offered to make payment, no
acceptance was indicated by Bougainville. Therefore, since an offer was made without
acceptance, no contract existed.
Consideration
Consideration concentrates on the requirement that something of value must be given and
accordingly states that consideration is either some detriment to the promise or some benefit to
the promisor. In the case of National Insurance Board v. Ann Marie Duncan-Mason and Peter
Mason, both offer, and acceptance were noted between the appellant and the respondent with
regards to the sale of the property held pursuant to the mortgage deed and the proceedings would
be paid towards the mortgage. However, the agreement lacked consideration therefore, it is not
legally enforceable.
Intentions to create legal relations
- Commercial Agreements
If a party intends to create legal intentions, it means that he or is intends or wishes to enter into a
legally binding agreement. The court establishes the intention to create legal relations based on
the facts and evidence provided. In commercial transactions, businesses should produce drafts of
the proposed agreement called “Subject to Contract” or “Letter of Intent”. In the situation where
the terms of the Subject to Contract are carried out before the official contract is created, the
court would have to carefully examine the evidence to determine whether the parties intended to
create legal relations. Once the court determines that an intention to create legal relations exists,
it would be concluded that a contract existed, and all parties involved are bound by law. In the
case of the Estate of Raphael Williams, Deceased, Cliff Williams and Aggie Williams v The
Mooring Limited, the claimants representing the deceased and the defendant entered into an
agreement for the defendant to pay $420,693.95 in fees outstanding to the deceased. In such
agreement, the parties all agreed on the terms and conditions of the agreement, therefore an offer,
acceptance as well as consideration were present. There was also no indication in the agreement
made that any of the parties wanted to make any further negotiations, therefore the parties
entered into the agreement with the intention of being legally bound, hence, the court decided
that there was intention to create legal relations.
Capacity
For a contract to be binding, it must be made by parties with the requisite capacity, that is, the
legal ability to make the contract. A mentally ill of drunk person may argue that they are not
bound to the contract. In the case of Hilda Elisabeth Stoutt, Peggy Stoutt- Harewood, Preston
Stoutt Appellants v. Firstbank Puerto Rico Respondent, the psychiatric reports allowed the judge
to find that Mrs. Stoutt was suffering from a mental disorder and her capacity to contract was
impaired when she executed the charges. A person who is not mentally capable of entering into a
legal contract will nevertheless be bound by its terms unless they can prove that at the time the
other party was aware of their incapacity. The judge therefore found difficulty in ascertaining
whether the bank had actual or constructive knowledge of Mrs. Stoutt’s disorder.
Taking Advantage
- Unconscionability
The courts of equity will set aside a contract based on it being unfair in circumstances where one
of the parties has imposed objectionable terms in a morally reprehensible manner.
Unconscionability can be pleaded as a defense against having to perform contractual obligations
where one party has been at a serious disadvantage to the other. In the case of Ellis v. Mckinnon
Broad, the plaintiff’s written employment contract contained a forfeiture provision that purported
to deny him commissions on advertising he sold if the station had not yet received payment for
the advertising before plaintiff terminated his employment. The court therefore determined that
the terms of the contract was unambiguous and held that the forfeiture was unenforceable since
the employee was unaware of the provision until he reread the contract before deciding to leave
the work. The court held that the record showed procedural unconscionability.
ANALYSIS
In this situation, Mag Ga presented a contract to Rajin a Jinna who forwarded it to his attorney
due to his inability to concentrate on paperwork because of his dyslexic capabilities and drug
usage. The attorney acted in good faith towards Rajin’s interests and submitted a counteroffer
rejecting the 50% commission of gross earnings since it was drastically above the industry
standard. However, Mag Ga failed to make the necessary changes with respect to the counter-
offer and carried the contract to Rajin’s studio where he was well aware that Rajin was under the
influence of cannabis. Rajin signed the agreement and therefore, a formal contract was formed
since all the elements of offer, acceptance and consideration was present. An intention to create
legal relations also existed since neither of the parties did not attempt to make any further
negotiations at the time.
However, Rajin found himself to be unsatisfied with his share of proceeds from various shows
he performed. This is unfair to Rajin since Mag Ga behaved in a highly unconscionable manner
where he was aware of Rajin’s dyslexia and drug abuse at the time of signing the contract. Mag
Ga took advantage of Rajin’s disadvantages which led to the acceptance of a contract with
reprehensible terms.
Additionally, Mag Ga was aware of Rajin’s mental incapacity in the form of his dyslexia as well
as his use of cannabis which stimulates the mind and may have affected Rajin’s judgement. As a
result, at the time of making the contract, Rajin lacked the capacity to understand the
implications of the contract and therefore should not be bound by the contract.
CONCLUSION
I would advise Rajin to initiate legal proceedings against Mag Ga since he acted unconscionably.
Rajin can argue that at the time of making the contract, he lacked the capacity to understand the
implications of the contract due to his intoxicated state as well as his dyslexia. Furthermore, he
was under the impression that Mag Ga had made the appropriate changes with the respect to the
counteroffer made by Rajin’s attorney and therefore should not be bound to the contract.
Question 71
Issue: Whether Biggus Michaelas can take legal action and how would he proceed against Get
Smart Limited and Big Lemon Limited.
Law:
 Separate Legal Personality
A Separate legal personality is where the corporation is regarded by law as a person or entity
distinct from the shareholders who composed it. In the case, Salomon v A. Salomon & Co.
Ltd, Mr. Salomon, a shoe manufacturer, had sold his company to a limited liability company in
this case. The company encountered financial difficulties and obtained a loan from Mr. Edmund
Broderip, who granted the loan. When Mr. Edmund failed to collect on his unsecured loans, he
filed a lawsuit seeking Mr. Salomon's personal liability. Mr. Salomon was found liable by the
court, but the decision was reversed on the grounds that a company had been duly formed and
could not be deprived of its separate legal personality.

 Lifting the Corporate Veil

Under certain circumstances, the court will lift the veil of incorporation and look for the actors
behind the company. It is accepted that the corporate veil will only be lifted in certain
circumstances. In the case of Adams and others v Cape Industries, the court refused to lift the
veil. This case saw the courts reinforce the Salomon principle. Since this case, it appears that
there are only a few circumstances in which the courts are likely to lift the veil under statutory
and common law.

 Sham/Façade
When a company is deemed to be a sham, a facade, or the alter ego of its shareholders, its
separate legal personality may be disregarded. In general, the evidence should indicate that the
shareholder, rather than the company, was conducting business. In the case of Jones v
Lipman exemplifies the primary case in which the veil was lifted, namely, when a company is
used as a mere facade concealing the true facts, implying that it was formed to avoid a pre-
existing obligation. Mr Lipman agreed to sell land to Mr Jones, but he later changed his mind
and refused to complete the transaction. To try to avoid a specific performance order, he
transferred it to a company formed solely for that purpose, which he owned and controlled.
Russell Judge imposed strict performance requirements on Mr Lipman and the company.

 Fraud or Misrepresentation
The corporate veil will be pierced where the company is used as a shield to conceal an act of
fraud or misrepresentation committed by the people who stand behind the company. In the case
of Gilford Motor Company Ltd v Horne, the court of appeals held that "the company was formed
as a device, a stratagem, to conceal Mr. Horne's effective carrying on of business." It was clear
that the main reason for forming the new company was to commit fraud.
 Agency
Where the company is used as an agent for its owner, the corporate veil will be pierced. In order
for limited liability to apply, the company must act for itself rather than as the shareholder's
agent. In the case of Smith, Stone & Knight Ltd v Birmingham Corporation, as a subsidiary of
Birmingham Waste Co Ltd, Smith, Stone and Knight Ltd (SSK) owned some land (BWC). The
courts ruled that the subsidiary company acted as an agent and that Birmingham was obligated to
pay compensation. In the case of Smith, Stone, and Knight Ltd, Atkinson J lifted the veil to
allow a subsidiary company operating on land owned by the holding company to seek
compensation on the basis of agency.
 Single Economic Entity
There is no general rule that all companies in a group of companies must be treated as a single
entity. Indeed, the fundamental principle is undeniable that each company in a group of
companies is a separate legal entity with its own set of rights and liabilities. Despite this, the
Court may, in appropriate circumstances, treat companies in a group of companies as a single
economic unit. In the case [1] Joan Marquis [2] Brands Inc. v. The Honourable Attorney General
of Saint Lucia, SLUHCVAP2015|0006 (STL), held that there was a failure to prove a single
entity between Brands Inc. and Ms. Marquis as there was no evidence to prove she was in sole
control of Brands Inc., therefore, the corporate veil was not lifted.
 Statutory Law – Fraudulent or Wrongful Trading
Fraudulent trading is prohibited under Section 447(1) of the Companies Act, Ch. 81:01 (TT).
Actual dishonesty involving, according to current concepts of fair trading, must be proved to
establish that aim. When a corporation trades and incurs debts despite the fact that its directors
and officers have a reasonable expectation that the obligations will not be paid. In the Matter of
Goodwill General Insurance Company Limited (In Liquidation), CV2006-02529 (TT),
Goodwill’s directors were accused of recklessly continuing operations of the business fully
aware that company assets were insufficient to cover liabilities and debts by the liquidator.
However, Rajkumar J held that insufficient evidence was provided but the liquidator and
although the company was involved in trading while the company was deemed insolvent this was
necessary as the directors were required to find funds under pressure.
 Statutory Law – Premature Trading
Section 20 of the Companies Act, Ch. 81:01, provides another example of personal liability (TT).
According to the clause, if a person enters into a contract in the name of a company before the
company is formed, that person can be held personally accountable for the transaction. In the
case of A. Leclerc & Co. (1926), 7 C.B.R. 712 (C.S. Que), a contract that was formed pre-
incorporation would not be legally accepted post-incorporation as it is considered premature
trading in order to become legally binding the contract would have to be reformed post-
incorporation under the same terms as contained in the original contract.

Analysis
Get Smart Limited purchased and repaired a vessel called “Sweet Lime” which was later sold to
a third party instead of Biggus Michealas. As such he began an action against the company
claiming damages for breach of sale agreement. However, upon the sale of the vessel, the funds
were transferred to another company, Big Lemon Limited, who owned all the shares of Get
Smart Limited as well as provided and managed the company with its funds. Since the vessel
was the only asset the company owned, Biggus was aware that Get Smart Limited would not
have any funds to satisfy any court awards to him.
As a result, the veil of incorporation must be lifted in order to hold the directors of Big Lemon
Limited liable since they owned all of the shares of Get Smart Limited and therefore can be
considered a parent company. Although both companies are a separate legal entity, they can be
regarded as a single economic unit since Get Smart Limited would be acting as an agent for Big
Lemon Limited where the shareholders were aware of their existing obligations to Biggus.
Upon the sale and transfer of funds of Get Smart Limited’s only asset, Sweet Lime, the company
would be insolvent which leads to the consideration of the company’s motive. This allowed the
company to not be able to repay Biggus. It can be said that the shareholders of Get Smart
Limited dishonestly evaded their existing obligations by using the protection of their corporate
veil in order to hide their wrong doings and as such, Get Smart Limited would be a sham or
façade since the company was used as an agent of the shareholders.
Additionally, the shareholders would be participating in fraudulent trading since they disregarded
the company’s obligation to Biggus by transferring all the funds to the parent company.
Furthermore, fraud was committed by the shareholders since they attempted to create a false
representation of the company’s funds in order to give the impression that they would not be able
to honour their obligations to Biggus.
Conclusion
I would advise Biggus Michealas to take legal action against Big Lemon Limited upon lifting the
corporate veil since Get Smart Limited operated as an agent, a sham or façade on behalf of Big
Lemon Limited in which fraud and fraudulent trading took place in their attempt to evade their
obligations.
PQ – 73
Issue: Whether Snowball Limited can sue John, Mary and Pico for the profits they made.
Law:
Duty of Directors
 Statutory Law
According to Section 99(1) of the Companies Act, Ch 81:01(TT) “Every director and officer of a
company in exercising his powers and discharging his duties is required to act honestly and in
good faith with a view to the best interests of the company and is also required to exercise the
care, diligence and skill that a reasonably prudent person would exercise under comparable
circumstances.” 1 In addition, every such person under 99(5) is to comply with the requirements
of the Act, regulations, articles, by-laws and any unanimous shareholder agreement. Except as
provided by any unanimous shareholder agreement, no provision in any contract or resolution,
the articles or by-laws relieves a director or officer from the duty to act in accordance with the
Act or the regulations or relieves him from any liability for breach thereof as stated in Section
99(6) of the Companies Act, Ch 81:01 (TT). In the case of Foster Parajo and Alicia Parajo,
Mario Berment CV2017 – 00624 (TT), Rahim J held that the first and second defendants did not
exercise the care and diligence expected of them as directors and are therefore liable for
managing the efforts of the third defendant so that it can pay its debts owed.
 Common Law – Misfeasance
Directors may be held responsible to the corporation for specific activities that constitute
breaches of trust or misfeasance. Misconduct that involves the misapplication of business funds
or property is referred to as "breach of trust," whereas "misfeasance" refers to other breaches of
duty that do not entail such misapplication but result in monetary loss to the firm. Directors have
broad discretion and cannot be charged if they behave honestly within it. In Re City Equitable
Fire Insurance Company, Limited, [1925] Ch. 407 (UK), the court stated for there to be no
misfeasance the director must act honestly, and exercise reasonable care expected of any
ordinary person. In this case, the court held that the director did display reasonable care and was
not guilty of misfeasance.

 Liability in Tort
In the discharge of the particular duties, which they have assumed, directors are bound, to take
reasonable care, and failure to exercise such care constitutes negligence. In Re Brazilian Rubber
Plantations and Estates, Ltd. [1911] 1 Ch. 425 (UK), the duty and obligation of directors towards
their company was in question. However, once there is honesty, they cannot be held responsible
in damages unless found guild of negligence. So once the director acts with such care that is
reasonable, having regard his knowledge and experience, which he is not bound to bring special
qualifications for, he is not bound. Therefore, it was believed that the contract was beneficial for
the company and notwithstanding the discrepancy in prices and absence of an independent
report, the conclusion was not arrived by negligence on part of the directors.
 Common Law - Non-Intervention in Company’s Affairs
A director is not bound to take any definite part in the conduct of the company's business, and a
director who takes no part in the negligent or ultra vires acts of the board will escape liability. In
Re Brazilian Rubber Plantations and Estates, Ltd. [1911] 1 Ch. 425 (UK), Neville J held that
once directors act honestly, they are not liable for damages unless they act dishonestly. In this
case, an action by the company against its directors for negligence, where no dishonesty was
alleged, failed.
 Common Law - Trustees and Fiduciary Duties
A company must act by agents, and usually, the persons by whom it acts are termed directors.
The Act does not define the exact position of directors. Directors have been described as mere
trustees of the company; trustees of the company's money and property; and trustees in the
transactions which they enter on behalf of the company. Directors cannot use the company's
property for their own benefit. It is a director's duty to give his whole ability, business
knowledge, exertion, and attention to the best interests of the shareholders who have placed him
in that position. Directors, by reason of their fiduciary obligations, in the exercise of their powers
are bound to act with the utmost good faith for the benefit of the company. Directors must not act
in bad faith. In the case of Iron Clay Brick Manufacturing Co. (1889), 19 O.R. 113 (CAN), the
court held that Mr. Turner could not act on his own personal behalf which would have been
construed to be inconsistent with the fiduciary character which he held as a director, therefore, he
was found to guilty of breach of trust.

 Common Law - Directors as Agents

Directors are agents in the transactions which they enter into on behalf of the company. In the
case of Ferguson v. Wilson (1886) L.R. 2 Ch. App. 77 (UK), held that there was no case for an
injunction there is no case whatever against the directors since the contract was alleged to be
formed by the company therefore it is unreasonable that the agents be brought into the court
which simply alleges that the principal has violated a contract that he has entered into, the court
held in the state of things it would be principle liable and not the agent.

Analysis
John Balgobin was utilizing his special skills in negotiating loans with banks as he was acting as
an agent of Snowball Limited in acquiring a bond to refurbish a business complex for the
company. The bank manager mentioned to John about a recently foreclosed office complex that
could be a deal if it was mentioned and purchased by Snowball Limited.
As such, John continued to act as an agent of the company since he was a director and exercised
his liability in tort by taking reasonable care in mentioning the conversation of the foreclosed
office complex during a board meeting. However, the manner in which the office complex was
mentioned may have led to no further action being taken on behalf of the company.
As a result, john secured a private loan for the downpayment on the complex and encouraged
another director, Mary Narine, as well as the General Manager, Pico Samwise, to invest in the
project which later made great profits for the investors and where Snowball Limited was not
satisfied with the outcome.
John exercised his responsibility to the company by acting in good faith and being honest as he
was seeking the best interest of Snowball Limited by mentioning the investment deal during the
meeting. John would not be liable since he did not breach the trust of the company and was not
involved in any misconduct. It was the fault of Snowball Limited for not taking into the
consideration and acting on the information given to them.
Furthermore, Mary and Pico did not show reasonable care to Snowball Limited since they failed
to mention their separate investment into the office complex. However, they were under the
impression that the company was uninterested in project.
The acts of John, Mary and Pico cannot be held liable since they were not acting dishonestly on
behalf of the company. Since Snowball Limited did not purchase the office complex, the
investors cannot be held liable for any of the profits made since they did not use the company’s
property for their benefit. This transaction occurred separately and not on behalf of the company.

Conclusion
I would advise Snowball Limited that they cannot sue the profits of Pico, Mary and John since
this investment was a separate transaction outside of their responsibilities to the company. John
executed his due diligence by informing the members of the board about the investment
opportunity, which was not taken into consideration and as such, Snowball Limited is not
entitled to any profits made.
PQ – 78
Issue: What is Soca’s legal position with respect to his activities with Ratsirda.
Law:
 Common Law Interpretation Act
The general rule of law is that the majority's will is the company's will.
 Statutory Rule – Interpretation Act
Section 37 of the Interpretation Act-Words in a written law passed or made after the
commencement of this Act establishing or providing for the establishment of a body corporate—
(c) vest in a majority of the members of the body the power to bind other members thereof,
subject to any quorum fixed by the written law under which it is established or by any relevant
standing orders;
 Exceptions to Common Law - Minority Shareholder
A share is a fractional ownership in a company. It gives the holder a certain right to the
company's proportionate asset. The general rule is that the majority's will is the company's will.
This is stated in both statutory and common law. However, it is widely acknowledged that there
are four exceptions to the rule. Jenkins L. J. states the four exceptions in Edwards v
Halliwell(1950) 2 ALL E R 1064 as follows: (1) the special majority exception (2) the exception
for illegal or ultra vires acts (3) the exception for personal rights, and (4) the true exception,
"Fraud on the Minority." In this case, Re Horbury Bridge, Coal, Iron & Waggon Co (1879) 11
Ch.D 109 (UK), held that the common law rule is to be followed and Mr Kippax was not
rightfully elected.
 Exception to Statutory Law – Dissenting Shareholders
Section 227(1) of the Companies Act, Ch. 81:01(TT), states that a shareholder of any class of a
company may dissent if the majority has decided to amend its articles, to add, change, or remove
any provisions restricting or constraining the issue of transfer of share of that class; to amend its
articles under Section 214 to add, change, or remove any restriction on the business that the
company can carry on; or to amalgamate with another company, unless otherwise prohibited.
This remedy is available even if the majority's behavior is not oppressive or unfairly prejudicial
to the minority's interests. The remedy is the purchase of shares. In the case, Dennis Vale Nixon
v. Anthony Russell Trace, 2012 BCCA 48 (CAN), held that the dissenting shareholder’s sole
remedy is the purchase of shares at fair value as voluntarily agreed upon or as determined by the
court.
 Exception to Statutory Law – Restraining Oppression
242. (1) Under this section, a complainant may apply to the Court for an order. (2) If, upon an
application under subsection (1), the Court is satisfied that, in the case of a company or any of its
affiliates, (a) any act or omission of the company or any of its affiliates results in a result; (b) the
company's or any of its affiliates' business or affairs are or have been carried on or conducted in
a manner; or (c) the powers of the company's or any of its affiliates' directors are or have been
exercised in an oppressive or unfairly prejudicial to, or that unfairly disregards the interests of,
any shareholder or debenture holder, creditor, director or officer of the company, the Court may
make an order to rectify the matters complained of. In the case Mohan Jaikaran (Appellant) v.
Tsidkenu Investment Corporation, Neil Seepersad Win TV Limited (Respondent) Civ. App. No.
105 of 2013 H.C.A No. 04064 of 2008 (TT), held that Jaikaran was to purchase the share held by
Seepersad in WIN TV. Jaikaran was also required to pay the claimants a sum of $ 9,252,849.27
and US$30,000 and take all the necessary steps to transfer the licence granted in his name by
TATT to WIN TV.
Duty of Directors
• Statutory Law
According to Section 99(1) of the Companies Act, Ch 81:01(TT) “Every director and officer of a
company in exercising his powers and discharging his duties is required to act honestly and in
good faith with a view to the best interests of the company and is also required to exercise the
care, diligence and skill that a reasonably prudent person would exercise under comparable
circumstances.” 1 In addition, every such person under 99(5) is to comply with the requirements
of the Act, regulations, articles, by-laws and any unanimous shareholder agreement. Except as
provided by any unanimous shareholder agreement, no provision in any contract or resolution,
the articles or by-laws relieves a director or officer from the duty to act in accordance with the
Act or the regulations or relieves him from any liability for breach thereof as stated in Section
99(6) of the Companies Act, Ch 81:01 (TT). In the case of Foster Parajo and Alicia Parajo,
Mario Berment CV2017 – 00624 (TT), Rahim J held that the first and second defendants did not
exercise the care and diligence expected of them as directors and are therefore liable for
managing the efforts of the third defendant so that it can pay its debts owed.
• Common Law – Misfeasance
Directors may be held responsible to the corporation for specific activities that constitute
breaches of trust or misfeasance. Misconduct that involves the misapplication of business funds
or property is referred to as "breach of trust," whereas "misfeasance" refers to other breaches of
duty that do not entail such misapplication but result in monetary loss to the firm. Directors have
broad discretion and cannot be charged if they behave honestly within it.
In Re City Equitable Fire Insurance Company, Limited, [1925] Ch. 407 (UK), the court stated
for there to be no misfeasance the director must act honestly, and exercise reasonable care
expected of any ordinary person. In this case, the court held that the director did display
reasonable care and was not guilty of misfeasance.

• Liability in Tort
In the discharge of the particular duties, which they have assumed, directors are bound, to take
reasonable care, and failure to exercise such care constitutes negligence.
 In Re Brazilian Rubber Plantations and Estates, Ltd. [1911] 1 Ch. 425 (UK), the duty
and obligation of directors towards their company was in question. However, once there is
honesty, they cannot be held responsible in damages unless found guild of negligence. So once
the director acts with such care that is reasonable, having regard his knowledge and experience,
which he is not bound to bring special qualifications for, he is not bound. Therefore, it was
believed that the contract was beneficial for the company and notwithstanding the discrepancy in
prices and absence of an independent report, the conclusion was not arrived by negligence on
part of the directors.
• Common Law - Non-Intervention in Company’s Affairs
A director is not bound to take any definite part in the conduct of the company's business, and a
director who takes no part in the negligent or ultra vires acts of the board will escape liability. In
Re Brazilian Rubber Plantations and Estates, Ltd. [1911] 1 Ch. 425 (UK), Neville J held that
once directors act honestly, they are not liable for damages unless they act dishonestly. In this
case, an action by the company against its directors for negligence, where no dishonesty was
alleged, failed.
• Common Law - Trustees and Fiduciary Duties
A company must act by agents, and usually, the persons by whom it acts are termed directors.
The Act does not define the exact position of directors. Directors have been described as mere
trustees of the company; trustees of the company's money and property; and trustees in the
transactions which they enter on behalf of the company. Directors cannot use the company's
property for their own benefit. It is a director's duty to give his whole ability, business
knowledge, exertion, and attention to the best interests of the shareholders who have placed him
in that position. Directors, by reason of their fiduciary obligations, in the exercise of their powers
are bound to act with the utmost good faith for the benefit of the company. Directors must not act
in bad faith. In the case of Iron Clay Brick Manufacturing Co. (1889), 19 O.R. 113 (CAN), the
court held that Mr. Turner could not act on his own personal behalf which would have been
construed to be inconsistent with the fiduciary character which he held as a director, therefore, he
was found to guilty of breach of trust.

• Common Law - Directors as Agents

Directors are agents in the transactions which they enter into on behalf of the company. In the
case of Ferguson v. Wilson (1886) L.R. 2 Ch. App. 77 (UK), held that there was no case for an
injunction there is no case whatever against the directors since the contract was alleged to be
formed by the company therefore it is unreasonable that the agents be brought into the court
which simply alleges that the principal has violated a contract that he has entered into, the court
held in the state of things it would be principle liable and not the agent.
Analysis
Don and Soca incorporated a company called Soca Vibes Café (SVC) with an agreement that
Soca would be the majority shareholder and would exclusively perform for SVC ltd to ensure
that the company would become the number one entertainment centre in Trinidad. However,
Soca made another agreement with Ratsirda where he would use his contacts to get major artistes
to perform at Ratsirda centre for a percentage of gate receipts. After some time, with the help of
Soca, Ratsirda centre became more popular than SVC Ltd, therefore making more profits. As
such Don was not happy with this arrangement.
The general rule of law is the will of the majority shareholders is the will of company. Soca
owned 60% of the shares at SVC Ltd. However, Soca acted in a manner that is unfairly
prejudicial to Don when he made an agreement with a third party. This agreement caused Soca to
unfairly disregard the best interest of Don since the initial agreement was breached where both
parties incorporated the company to remain exclusive and make SVC Ltd the most popular
entertainment in Trinidad. A derivative action can be taken against Soca on behalf of Don since
Soca decided to aid another company and also receive payment for doing so without informing
Don of such arrangement and also not giving him a share of the proceeds.
Since Soca was a director of SVC, he acted dishonestly as an agent of the company by
breaching the trust and agreement between directors and/or shareholders. Soca was bound to take
reasonable care of his company but rather constituted negligence since he allowed Ratsirda
centre to surpass the popularity and profitability of SVC Ltd and also failed to inform Don about
his agreement which would in turn, affect their initial agreement. Therefore, Soca can be held
liable for his actions since he not only acted dishonestly and failed to exercise care and diligence
in the best interest of the company and fellow director but also benefitted from secret profits as a
result of Ratsirda’s growing popularity.

Conclusion
I would advise Soca that he can be held liable for his actions since he acted dishonestly towards
the company and fellow director as a result of his activities with Ratsirda. Therefore, Soca
should cut ties with Ratsirda centre and compensate Don a percentage of the profits he made
from the gate receipts and continue to grow the popularity of SVC Ltd exclusively.
PQ – 72
Issue: Whether PNIF should attempt to satisfy any debts incurred by PNL
Law:
 Separate Legal Personality
A Separate legal personality is where the corporation is regarded by law as a person or entity
distinct from the shareholders who composed it. In the case, Salomon v A. Salomon & Co.
Ltd, Mr. Salomon, a shoe manufacturer, had sold his company to a limited liability company in
this case. The company encountered financial difficulties and obtained a loan from Mr. Edmund
Broderip, who granted the loan. When Mr. Edmund failed to collect on his unsecured loans, he
filed a lawsuit seeking Mr. Salomon's personal liability. Mr. Salomon was found liable by the
court, but the decision was reversed on the grounds that a company had been duly formed and
could not be deprived of its separate legal personality.

 Lifting the Corporate Veil

Judges' efforts to lift the veil have been hampered in general by the Salomon case, which
effectively eliminated the possibility of viewing a "one-man company" as merely an alias or
agent for the principal shareholder. In the case of Adams and others v Cape Industries, the court
refused to lift the veil. This case saw the courts reinforce the Salomon principle. Since this case,
it appears that there are only a few circumstances in which the courts are likely to lift the veil
under statutory and common law.

 Sham/Façade
When a company is deemed to be a sham, a facade, or the alter ego of its shareholders, its
separate legal personality may be disregarded. In general, the evidence should indicate that the
shareholder, rather than the company, was conducting business. In the case of Jones v
Lipman exemplifies the primary case in which the veil was lifted, namely, when a company is
used as a mere facade concealing the true facts, implying that it was formed to avoid a pre-
existing obligation. Mr Lipman agreed to sell land to Mr Jones, but he later changed his mind
and refused to complete the transaction. To try to avoid a specific performance order, he
transferred it to a company formed solely for that purpose, which he owned and controlled.
Russell Judge imposed strict performance requirements on Mr Lipman and the company.

 Fraud or Misrepresentation
The corporate veil will be pierced where the company is used as a shield to conceal an act of
fraud or misrepresentation committed by the people who stand behind the company. In the case
of Gilford Motor Company Ltd v Horne, the court of appeals held that "the company was formed
as a device, a stratagem, to conceal Mr. Horne's effective carrying on of business." It was clear
that the main reason for forming the new company was to commit fraud.
 Agency
Where the company is used as an agent for its owner, the corporate veil will be pierced. In order
for limited liability to apply, the company must act for itself rather than as the shareholder's
agent. In the case of Smith, Stone & Knight Ltd v Birmingham Corporation, as a subsidiary of
Birmingham Waste Co Ltd, Smith, Stone and Knight Ltd (SSK) owned some land (BWC). The
courts ruled that the subsidiary company acted as an agent and that Birmingham was obligated to
pay compensation. In the case of Smith, Stone, and Knight Ltd, Atkinson J lifted the veil to
allow a subsidiary company operating on land owned by the holding company to seek
compensation on the basis of agency.
 Single Economic Entity
There is no general rule that all companies in a group of companies must be treated as a single
entity. Indeed, the fundamental principle is undeniable that each company in a group of
companies is a separate legal entity with its own set of rights and liabilities. Despite this, the
Court may, in appropriate circumstances, treat companies in a group of companies as a single
economic unit. In the case [1] Joan Marquis [2] Brands Inc. v. The Honourable Attorney General
of Saint Lucia, SLUHCVAP2015|0006 (STL), held that there was a failure to prove a single
entity between Brands Inc. and Ms. Marquis as there was no evidence to prove she was in sole
control of Brands Inc., therefore, the corporate veil was not lifted.
• Statutory Law – Fraudulent or Wrongful Trading
Fraudulent trading is prohibited under Section 447(1) of the Companies Act, Ch. 81:01 (TT).
Actual dishonesty involving, according to current concepts of fair trading, must be proved to
establish that aim. When a corporation trades and incurs debts despite the fact that its directors
and officers have a reasonable expectation that the obligations will not be paid. In the Matter of
Goodwill General Insurance Company Limited (In Liquidation), CV2006-02529 (TT),
Goodwill’s directors were accused of recklessly continuing operations of the business fully
aware that company assets were insufficient to cover liabilities and debts by the liquidator.
However, Rajkumar J held that insufficient evidence was provided but the liquidator and
although the company was involved in trading while the company was deemed insolvent this was
necessary as the directors were required to find funds under pressure.
• Statutory Law – Premature Trading
Section 20 of the Companies Act, Ch. 81:01, provides another example of personal liability (TT).
According to the clause, if a person enters into a contract in the name of a company before the
company is formed, that person can be held personally accountable for the transaction. In the
case of A. Leclerc & Co. (1926), 7 C.B.R. 712 (C.S. Que), a contract that was formed pre-
incorporation would not be legally accepted post-incorporation as it is considered premature
trading in order to become legally binding the contract would have to be reformed post-
incorporation under the same terms as contained in the original contract.
Analysis
Pretty Nick Limited (PNL) formed a new wholly owned subsidiary, Pretty Nick International
Finance (PNIF). Therefore, PNL would be the holding or parent company for PNIF. Upon its
incorporation in the Cayman islands, PNL transferred 200 million US dollars to PNIF who then
took out a loan for 150 million US dollars which was in turn relent to PNL. However, PNL
incurred financial difficulties and are unable to satisfy their existing debt obligations to creditors.
The court lifts the veil of a company’s incorporation under certain circumstances. The motives of
the formation and running of PNIF must be considered when assessing the liability of debts
incurred by PNL. It can be said that PNL formed PNIF as a subsidiary with the goal of using its
incorporation as a means of covering a deliberate wrongdoing in order to evade existing
obligations when it comes to repaying its creditors.
PNIF can therefore be considered a sham or façade and a means for PNL to commit fraud and
partake in fraudulent trading since 200 million US dollars was transferred and deposited in the
Cayman Islands, however, PNIF still took out a loan of 150 million US dollars which was lent to
PNL. PNL then continued to create a false representation of its financials in an attempt to avoid
its obligations. As such, PNIF was used as an agent of its parent company.
It is without a doubt that both companies are separate legal personalities, however, they should
be considered a single economic entity as a result of its actions and evidence in order to be liable
for their obligations.
Conclusion
I would advise PNIF to attempt to satisfy the debts incurred by PNL using any surplus funds they
have access to in order to reduce any further charges they may incur as a result of their
fraudulent behaviour on behalf of not only PNL and PNIF but also its directors.
PQ – 83
Issue: Whether Abigail would be held liable for the decision and action executed by Sweety.
Law
Definition of a Partnership
According to Section 3 of the Partnership Act, Ch. 81:02 (TT), 1 a partnership is the relation that
exists between persons carrying on a business with a view to profit.
 Persons
A partnership is a relationship that exists between persons. The word ‘persons’ is essential as it
signifies that one person cannot create a partnership. A partnership can comprise of both persons
and companies.
 Carrying on a Business
The term ‘carrying on’ implies some form of continuous undertaking, as such restricting the
creation of a partnership for the purpose of a one-off transaction. The courts, however, have not
limited the creation of a partnership in this manner and have held that a partnership may be
formed for a one-off transaction.
In the case of Khan v. Miah [2000] 1 WLR 2123 (UK), the court held that persons who agree to
carry on a business activity as a joint venture does not become partners until they actually
embark on the activity in question.
 In Common
In a partnership that is being established to carry out some form of business, the persons
involved must be carrying on the business ‘in common
In the case of Saywell and others v. Pope [1979] STC 824 (UK), held that there were not
sufficient grounds to interfere with the commissioner’s decision thus the appeal was dismissed.
Therefore, the two wives were found to not be partners and did not act in common to their
husbands.
 View of Profit
A partnership should be established with the intention of making a profit. A business in common
in which no financial return is expected does not establish a partnership.
In the case of M. Young Legal Associates Ltd (Claimant) v. Zahid and Others (Defendant)
[2006] EWCA Civ 613 (UK), Wilson Lj held that although a person may not receive profit but
rather a sum of payment respective of profits still makes the person considered a partner.
 Co-Ownership of Property
Section 4(a) of the Partnership Act, Ch. 81:02 (TT) states that co-ownership of property does not
of itself create a partnership, as to anything so held or owned, whether the tenants or owners do
or do not share any profits made by the use thereof.
In the case of French v. Styring [1857] 21 JP 743 (UK), although the court didn’t not consider
them a partnership, Willes J still voiced his opinion on the co-ownership of the horse where he
held that A is was entitled to recover from B a moiety of the disbursements made by him on
account of the horse, as being in the nature of an advancement of capital for B.
 Sharing of Profits
Section 4(c) of the Partnership Act, Ch. 81:02 (TT) stipulates that sharing of profits of a business
is prima facie evidence of the existence of a partnership
In the case of Davis v. Davis [1894] 1 Ch. 393 (UK), North J held that the sharing of profits
proved the existence of a partnership in the business.
 Sharing of Gross Profits
Section 4(b) of the Partnership Act Ch. 81:02 (TT), clarifies that the sharing of gross returns does
not of itself create a partnership, whether the persons sharing the returns have or have not a joint
or common right or interest in any property from which, or from the use of which, the returns are
derived.
In the case of Cox v. Coulson, [1916] 2 K.B. 177 (UK), Swifen Eady Lj held that although there
was a sharing of gross profits this in itself does constitute a partnership.
 Partnership Is A Mixed Question of Law And Facts
There is a clear statutory definition of what constitutes a partnership, however, the question of
whether a partnership exists is a mixed one of law and facts.
In the case of Keith Spicer v. Mansell ([1970] 1 WLR 333 (UK), Harman J agreed with the
county judge’s ruling based on the evidence, concluding that there was no partnership.
 Partnership Agreement
A partnership agreement can be in writing or oral. The relations between partners are regulated
by partnerships agreements
In the case of Hitchman v Crouch Butler Savage Associates (a firm) and another; Hitchman
v. Walker and others [1983] Lexis Citation 2101, Dillion Lj allowed the appeal to be dismissed
as the allegations for expulsion was unfounded.
 Power Of Partner to Bind Firm
A partner is perceived as an agent of a partnership and the acts of a partner subject to certain
qualifications binds all partners.
In the case of British Homes Assurance Corporation, Limited v. Paterson [1902] 2 Ch. 404
(UK), Farell J held that all the partners are liable because the individual partner acted or
contracted as an agent for them as either disclosed or undisclosed principals.
 Liability Of Partners to Third Parties
Every partner is liable jointly and severally for debts and obligations incurred on behalf of the
partnership while he is a partner.
In the case of Meekins v. Henson and Others [1964] 1 Q.B. 472 (UK), the judge ruled that the
occasion of the publication was one to which qualified privilege attached. And the jury found
that the plaintiff had established malice.
Analysis

Conclusion