Commercial realities

Since Besanko J depended his judgment largely upon the fact that profits were not transferred to partner, the way in which PNGair distributed its profits becomes relevant to Aussieair’s case in deciding agency relationship. However, it is given in the case that all of the profits were to be remitted to Aussieair in the form of dividends, which is opposite to the situation found in Bird Cameron. That is to say, such evidence is an indicator to the contrary of what was decided in Bird Cameron.

Based on this point only, Aussieair and PNGair are still regarded as having agency relationship. 1. Considering the commercial realities There are a plenty of cases where the court was reluctant to infer an implied agency. With scant attention paid to commercial realities, Rogers CJ observed that “it was seldom that” groups “paused to consider which of the subsidiaries should become the contracting party”[11].

In Stanborough v Woolworths Ltd[12], the tension was also illustrated between commercial realities and the separate entity doctrine. The decision in Commisioner of Taxation v BHP Billiton Finance Ltd[13] even reinforces the view that it is unlikely to pierce the corporate veil because of corporate group taking advantage of the benefits of separate legal status and that commercial morality has no role to play in those situations (Hargovan and Harris 2011, p. 92).

In Tate v Freecorns, Burt J paid scant regard to commercial realities and found practical facts which did not suggest an implied agency. Eventually, his Honour found no difficulty in denying such a relationship. As made clear in the section above, Aussieair retained all profits gained by PNGair in the form of dividends. However, the aircrafts and facilities owned or leased by Aussieair, which were necessary to run an aviation business, were either sold or subleased to PNGair in July 2011.

Soon after that, in August, PNGair got the aviation commercial license transferred from Aussieair, which means it could operate its domestic and international airline business from that date. It is clear that prior to the date when pilots and senior managers of Aussieair were made redundant (in September 2011), PNGair had already owned the property and equipments that were necessary for their business. 1. Improper use of corporate group Recent cases have also appreciated facts that companies abused the corporate veil for questionable purposes.

In Australian Liquor, Hospitality and Miscellaneous Workers Union, Western Australian Branch v Burswood Resort Management Limited and Burswood Catering and Entertainment Pty Ltd[14], the court held that not to pierce the corporate veil and regard the member’s service as with one person in that circumstances would be unjust, inequitable and unconscionable: Whilst it should not be lightly pierced, the corporate veil should not be allowed in proper circumstances in an administrative tribunal such as this to prevent the Commission acting according to equity, good conscience and the substantial merits of the case (i.

e. where it is used to justify wrong, protect fraud, or bring about an inequity which otherwise would not have been occasioned). Public awareness has been raised upon a number of practices and cases. James Hardie’s actions in seeking to shelter group assets from tort victims is one of the most dramatic both legally and morally. Dunn called for law reform so as to restrict the application of the limited liability principle (2005 p. 352). Strasser concluded from a number of cases involving corporate groups that “a substantially reformulated version” has been under developing subconsciously (2005 p.

664). Regarding Aussieair’s cost cutting exercise, it should be pointed out that the Board of Directors got awarded in AGM. This is a strong indication that the transactions made by Aussieair earlier were driven by an unjust, inequitable and unconscionable purpose. 1. CONCLUSION Since the veil-piercing issue plays an essential role in this case and the law in Australia has not yet fully worked out certain answers regarding this issue, there is no guarantee for the success of the legal action taken by the employee associations.

However, it is revealed from analysis above that it is highly probable that they can succeed in their legal proceeding. Although Aussieair can argue in respect to commercial realities and property owned by PNGair itself, emphasis is likely to be placed on their control of PNGair, transfer of profits generated by PNGair and questionable purposes.

Reference list:

Hargovan A and Harris J, ‘The Relevance of Control in Establishing an Implied Agency Relationship Between a Company and its Owners’ (2005) 23 Company and Securities Law Journal 69, p. 463.Ford H, Austin R and Ramsay I, Ford’s Principles of Corporations Law (9th Edtion, Butterworths, Sydney, 1999), para 4. 370. Ramsay I and Stapledon G, ‘Corporate Groups in Australia’ (2001)

 Australian Business Law Review 7, p. 15. Dunn E, ‘James Hardie: No Soul to be Damned and No Body to be Kicked. ’ [2005] Sydney Law Review 15, p. 352. Strasser K, ‘Piercing the Veil in Corporate Groups’ (2005) 37 Conn. L. Rev. p. 664 Hargovan A and Harris J, ‘Together Alone: Corporate Group Structures and Their Legal Status Revisited’ (2011) 39 Australian Business Law Review, p. 92.