Question 1 [10 marks]

During the period 2009-16 David was employed as a sales representative for Nu Shampoo Pty Ltd, a company which distributes hair-care products throughout South Australia. A term of his contract was that if he should leave the company, he could not engage in the hair-product industry for five years.

In 2017 he left Nu Sampoo Pty Ltd and registered a company called Hair-Glo Pty Ltd. David owns 99% of the shares in the company. The other 1% is owned by his sister, Monica, whom he elected as sole director and CEO. In her capacity as CEO, Monica signs a contract on behalf of the company with David, appointing David as Operations Manager for Hair-Glo. The company operates from Adelaide and sells shampoo and conditioner to hairdressing salons throughout South Australia, many of which know David from his employment with Nu Shampoo. Monica took no active part in the running of the company, apart from having signed a contract on behalf of Hair-Glo with Standard Bank in 2017, taking out a loan of $ 1 million as start-up capital. No security was required for the loan by the bank.

The company did well during 2017 and 2018, but in early 2019 was not able to repay a loan instalment of $ 100 000 owing to Standard Bank Ltd. David comes to you for advice after receiving two letters: One from Nu Shampoo Pty Ltd requiring him to cease the operations of Hair-Glo Ltd in South Australia, the other from Standard Bank Ltd threatening to sue him personally for $ 100 000. Advise him as to his position, citing all relevant legal authority.

Please note that you should assumethat the restraint of trade clause in the contract that David had with Nu Shampoo is valid under the law of contract.

Question 2 [10 marks]

Four friends – Anne, Mary, Jane and Sarah – who met at university graduate as medical practitioners in the same year. Because they all get on so well and trust each other’s judgement, they decide to form a partnership of general practitioners in Western Sydney, which they call Your Local Doctor. They sign a partnership agreement in terms of which they are all equal partners. The agreement also states that each partner will have authority to enter into contracts of up to $ 10 000, but that contracts in excess of that amount require the agreement of all the partners.

Anne and Mary go overseas one year, leaving Jane and Sarah to run the practice. When they return, they discover that the following has happened:

Just before she went away, Anne had noticed that the practice had almost run out of paper for the printer, so she left a note for Jane, asking her to order a new supply. When Anne and Mary returned, they found that Jane had paid $ 2 000 to buy printer papers from a business run by her boyfriend, whereas the usual supplier would have charged $ 1 200 for the same amount of paper. They are also displeased to find two invoices, addressed to Your Local Doctor, awaiting payment: One is from United Medical Suppliers Pty Ltd for $ 13 000 worth of medical instruments ordered by Jane. The other is for $ 2 000 from Uber Australia Ltd for driver training course ordered by Sarah, who had previously argued that the four doctors should run a local ride-share service on days when the practice was not busy.

Advise Anne and Mary as to what liabilities arise from the above facts, citing relevant