BUSINESS/COMMERCIAL LAW PRACTICE FINAL EXAM QUESTIONS

These practice exam questions have been provided to assist in your preparation for your Business/Commercial Law end of semester exam.

Please do not limit your study to these practice questions, or to practice questions in general. Exam questions vary from semester to semester, and our course content has also changed over time. In addition, it is important that you spend time ensuring that you have properly learned your course content before attempting practice questions.

Keep in mind that whilst these practice questions are indicative of the style of questions you may encounter in your end of semester exam, the format of questions and the legal issues covered may differ. Please make sure that you refer to Moodle for important information regarding your exam structure, and this semester’s examinable topics. Please also make sure that you refer to the mock eExam on Moodle to familiarise yourself with the eExam platform ahead of your actual exam.

Though your exam is Open Access, you should ensure that you study just as hard as you would for a closed book exam. To make the most of these practice questions, attempt them under self-imposed exam conditions – that is, using the resources you will have with you for your exam, typed on your computer, and sticking to a time limit. If you do this, you certainly won’t produce perfect answers on your first attempts, but you will maximise your capacity to learn and improve ahead of the exam itself.

Brief answer outlines are provided to some questions at the end of this document. You are strongly encouraged to attempt these questions first, under self-imposed exam conditions, before looking at those answer outlines.

Looking at answers without attempting the questions first is of little to no assistance in your study, as it  will not give you a genuine opportunity to test your knowledge nor the opportunity to practice your skills in responding to hypothetical legal problem questions.

Note: the answer at the end of this document only provide a guide to the legal issues you should explore, they are not representative of how you should write your responses. Your responses should be written in full sentences, using paragraphs and heading etc (please refer to the Final Exam Assessment Specifications on Moodle for more details).

We wish you all the very best of luck with your studies!

THE LAW OF TORTS

*Question 1 (12 minutes)

AshrafGhani completed a diploma in Cooking and Baking at William Anguish College. Immediately    after graduating he set up his own bakery in Dandenong that he called “Kabul Breads”. Afew months later, as things were going well, Ashraf decided to expand his business. Around that time, he met an  old Afghani friend, Shah Masood, who was an accountant and a financial adviser. They discussed

Ashraf’s expansion plans, and Shah quickly offered to review his financial situation and to prepare a business plan. As Ashraf was financially ignorant and needed expert guidance, he accepted Shah’s offer and gave his financial records.

Shah prepared a financial report and advised Ashraf that he was in a sound financial position, and that he could expand his business. He recommended that Ashraf borrow money in order to set up a new bakery on fashionable Lygon Street, in Carlton (a suburb of Melbourne). Ashraf trusted his friend and  decided to act on the advice. He borrowed $500,000 from “For You Only”, a small credit union located in Springvale that provides loan and overdraft facilities. “For You Only” used the financial report prepared by Shah to offer a loan to Ashraf. Ashraf signed a five-year lease.

Soon after opening his new shop, Ashraf realised that people who visit the Lygon Street area generally only buy traditional Italian food and bread – there was no market for Afghani bread. Ashraf came under financial stress, and blamed Shah for his situation. Shah admitted that he had not adequately factored  in Ashraf’s pre-existing debts, and had underestimated the significant costs associated with setting up  the new business. Shah advised Ashraf to terminate the lease and inform “For You Only” that he would be unable to repay the loan. “For You Only” is faced with significant losses.

(a) Advise Ashraf about his prospects of success in an action against Shah in the tort of negligence. Refer to relevant cases and statutes. (14 marks)

(Approximately 28 minutes of writing time)

(b) Does Shah owe “For You Only” a duty of care? Refer to relevant cases. (6 marks)

*Question 2 (28 minutes)

The Big Cheese Pty Ltd makes cheese. During the manufacture of a particular batch of cheese marked ‘use by 31 March 2019’, The Big Cheese omitted to put the batch through the bacteria treatment process which usually kills any bacteria which has affected the cheese. The cheese was then packaged in airtight plastic packaging and was sold to Monash Supermarkets Pty Ltd for sale in their supermarkets.

On 15 March, Louisa purchased a block of cheese which was marked ‘use by 31 March 2019’ from Monash Supermarkets Pty Ltd in Caulfield. Louisa stored the cheese in the refrigerator but did not look at the ‘use by’ date. On 7 April, during her lunchbreak at work she ate part of the cheese which was contaminated by bacteria and became very ill. She fainted in the office, and in the process of fainting  she slipped on the power cord of her laptop computer, which was dragged over the side of her desk and dropped to the floor, causing the screen to crack. The laptop was valued at $5,000. Louisa was admitted to hospital, incurred ambulance and medical expenses, and was unable to work for 6 weeks.

Advise Louisa of her prospects of success in an action against The Big Cheese Pty Ltd in the tort of negligence. Please discuss all elements of a negligence action and any defences that might apply.

Please ensure that you use relevant legal principles and authority in support of your answer (ie. cases and/or legislation). (14 marks)

Question 3 (24 minutes)

Avis is a bunk bed manufacturer. It sells beds, with a tag “suitable for children ages 7+”. Bob, a 5-year- old boy, is badly injured when he falls down from the top level of an Avis double bunk when attempting to get down from the bed. He was staying with friends. There is no ladder or guard-rail.

Advise Avis as to its potential liability under the tort of negligence.

Question 4 (24 minutes)

Crystal Cruises operates a business specialising in sailing cruises around Phillip Island. The cruise stops at various places to allow passengers to go swimming and snorkelling. In January 2020, Ted is a passenger on a cruise. Unfortunately, while snorkelling, Ted is stung by a poisonous bluebottle jellyfish on his upper back, neck, and face, and suffers a severe reaction.

He incurs medical expenses, including the cost of an emergency ambulance, totalling $1,800, and a  loss of income of $900. He also lost his underwater camera worth $1,100 as he dropped it due to the pain of being stung by the jellyfish.

An investigation into the matter reveals that during the summer months, hundreds of these jellyfish are known to be present in the waters around Phillip Island. There are usually around 10,000 cases of bluebottle stings each year on the east coast of Australia, but most of these stings, while painful, do not need emergency medical treatment. The number of stings per year around Phillip Island is estimated to be 500.

Crystal Cruises has never had a passenger get stung before, in more than 10 years of operating.

Crystal Cruises conducts a safety briefing at the start of the cruise, and recommends that passengers wear a wetsuit to protect themselves when swimming and snorkelling during the summer months.

However, Crystal Cruises allows passengers to swim and snorkel without wearing a wetsuit. The wetsuits that are provided by Crystal Cruises do not cover the neck, face, hands or feet. Wetsuits providing greater protection, and which cover the neck, hands, feet and most of the face are available, but they are five times the price of a normal wetsuit. Ted was not wearing a wetsuit when he was snorkelling.

Advise Ted about his prospects of success in an action against Crystal Cruises in the tort of  negligence. Please discuss all elements of a negligence action, and any defences that might apply. Please ensure that you use relevant legal principles and authority in support of your answer (ie: cases and/or legislation).

Question 5 (10 minutes)

Romeo Constructions is a property developer. Before acquiring a substantial property in the city for the purposes of redevelopment into new apartments, Romeo Constructions contacts the local council to obtain copies of zoning restrictions. The council provides Romeo

Constructions with details of the zoning restrictions for the wrong property by mistake.

Romeo Constructions purchases the block, but later discovers that it will not be able to develop the property as planned due to heritage restrictions that prevent the existing building from being demolished. There are also strict requirements that must be met for any changes to the building. Romeo Constructions would not have purchased the block if it had known of  the heritage restrictions, and the amount that it paid for the property was $900,000 over the property’s true value as a result of the council’s mistake.

Advise Romeo Constructions whether the local council owes Romeo Constructions a duty of care in the tort of negligence. Do not discuss other elements of the tort of negligence when answering this question. Please ensure that you use relevant legal principles and authority in support of your answer (ie. cases and/or legislation).

Question 6 (28 minutes)

Aussie Barracuda specialises in designing and making handcrafted surfboards. The surfboards are all individually made by hand, with unparalleled attention to detail and the highest quality craftsmanship. Aussie Barracuda employs a small team of board makers who each have several years’ experience in handcrafting surfboards. While making the surfboards, there is a small risk that hot fibreglass resin may splash during the shaping and moulding process, as well as small particles flying in the air during the sanding process.

Aussie Barracuda has issued safety glasses to all of its board makers, with strict instructions that the glasses must be worn at all times within the factory. They have also placed a sign in  the factory work area which states: “Safety equipment must be worn at all times.” The factory supervisor, Gary, rarely checks to see whether the board makers are wearing their safety glasses.

One of the board makers, Jessie, is splashed in the face and eye with hot fibreglass resin. He jumped up screaming, and then collapsed in the work area, in the process knocking his brand new smart phone to the floor, where it was smashed to pieces. The phone was valued at $1,200. Jessie required hospitalisation, incurred medical expenses, and a loss of income, as he was unable to work for two months.

An investigation into the matter discovers that Jessie was not wearing the safety glasses, and, while working, Jessie was also sending text messages and listening to music on his new smart phone. It is also discovered that instead of safety glasses, protective face masks could have been issued by Aussie Barracuda, which would have protected the whole face, not just the eye area, but these would have been 5 times the cost of the safety glasses. The investigation also shows that this type of accident has never happened before at Aussie Barracuda in more than 25 years of operations, but on average occurs in the industry approximately once every   10 years.

Advise Jessie about his prospects of success in an action against Aussie Barracuda in the tort of negligence. Please discuss all elements of a negligence action and any defences that might apply. Please ensure that you use relevant legal principles and authority in support of your answer (ie. cases and/or legislation).

Question 7 (12 minutes)

Epic Consultants are looking to buy commercial premises for a new office. They consult with Sunshine Real Estate, who assists Epic Consultants to find suitable premises in the suburb of their choice. Before making an offer, Sunshine Real Estate prepares a report for Epic Consultants setting out comparable sales in the area. Epic Consultants uses this report to decide how much to offer to buy their preferred premises. The offer is accepted straight away  by the vendor of the premises, without any negotiation. Later Epic Consultants discovers that  Sunshine Real Estate typed in the wrong postcode when retrieving the comparable sales data for the report, which resulted in Epic Consultants paying too much for the new premises.

They paid more than $50,000 above the current market rate.

Advise Epic Consultants whether Sunshine Real Estate owes Epic Consultants a duty of care in the tort of negligence. Do not discuss other elements of the tort of negligence when answering this question. Please ensure that you use relevant authority in support of your answer (ie. cases and/or legislation).

Question 8 (28 minutes)

Amazo Ltd makes the highest quality blown glass figurines. The figurines are all individually made by hand. Amazo has a dedicated team of experienced glass blowers. However, as with all glass blowing, there is small risk that the glass bubble will pop and send glass shards in the air. Glass blowers need to cool equipment using water, and sometimes this water spills on the ground.

Amazo has a strict policy that safety goggles must be warn at all times when on the glass blowing floor of the factory. The factory safety supervisor, Bernard, checks once every morning to see that the glass blowers are wearing their safety glasses. However, there are no signs in the workplace about safety equipment. Bernard also patrols once every 3 hours to check for spilled water. Spills are mopped up on these patrols, but not at other times.

One afternoon, Caj, an experienced glass blower working for Amazo, slips on a puddle of water that had spilled earlier. This causes Caj’s arm to rapidly move and causes the glass bubble Caj is working on to shatter, sending a glass shard into Caj’s eye. Caj required eye surgery in hospital, incurred medical expenses, and suffered a loss of income, as Caj was unable to work for 6 weeks.

An investigation into the matter discovers that David, another glass blower, accidentally spilled water on the floor about 2 hours before Caj’s accident. Moreover, Caj was not wearing the safety glasses at the time of the accident. The investigation reveals that several workers have complained that the safety glasses fog up in the afternoon and make it difficult to see as the factory floor heats up. There are non-fog safety glasses. However, the cost of  non-fog safety glasses is 15 times the cost of regular safety glasses.

The investigation also shows that reports of workers slipping on spilled water are fairly common, occurring about three to five times a year, but that most of these have been minor injuries, not requiring any medical treatment.

Advise Amazo about their prospects of success in defending an action brought against them by Caj in the tort of negligence. Please discuss all elements of a negligence action and any defences that might apply. Please ensure that you use relevant legal principles and authority in support of your answer (ie: relevant cases and legislation).

Question 9 (12 minutes)

Axe Land would like to expand its business selling musical instruments. Axe has approached Big Bank to ask for a $500,000 loan to support this expansion. Big Bank requires numerous business planning and financial statement documents from Axe. The documentsAxe provides indicate that Axe is in a sound financial position. These documents were prepared by Cento Accounting firm. Axe did not tell Cento that the documents would be used as part of a loan application to Big Bank. Cento routinely prepares documents that are used in loan applications, but did not know of Axe’s specific intention to seek a loan. Big Bank relies on the documents and decides to give Axe the requested loan. 

Later, Big Bank discovers that Cento had failed to take into account a large judgment against Axe arising from a labour dispute. The result was that the financial documents prepared by Cento overstated Axe’s worth by $10 million. This meant Axe was in fact in a poor financial position and the business expansion made the situation worse. Axe is unable to make its repayments for the $500,000 loan and defaults. As a result, Big Bank has suffered a significant loss.

Advise Big Bank whether Cento Accounting owes Big Bank a duty of care in the tort of negligence. DO NOT discuss other elements of the tort of negligence when answering this question. Please ensure that you use relevant authority in support of your answer (ie: cases and/or legislation).

THE LAW OF BUSINESS ORGANISATIONS

*Question 10 (12 minutes)

Vance and Cadel are good friends and enthusiastic cyclists. Vance has won several events  and is well-known in the cycling community. Now in their sixties, they decide to start a small  business selling bicycles and establish a partnership. It is agreed that Cadel will play a more active role in the day-to-day running of the shop whilst Vance will do promotions and continue racing on the veterans’ circuit, wearing the partnership’s colours. It is also agreed that Cadel may purchase stock for the business, up to the value of $5,000 per month.

Several months after the partnership was established, Cadel purchases six high performance Italian racing bikes from Avanti’s agent in Melbourne. Each racing bike costs $15,000. When  the invoice arrives, Vance is angry and refuses to agree to pay. These were clearly the most  expensive bikes that Cadel had ever ordered. Avanti threatens legal action against the partnership.

Advise Vance whether he can be held liable for the purchase made by Cadel, under the Partnership Act. (6 marks)

*Question 11 (16 minutes)

Jacob Farook’s company, JF Solar Panels Pty Ltd, has been running a solar panel business for many years. Jacob is the sole director and the sole shareholder. In July 2016, Jacob ordered

glass panels to the value of $1 million from Glass Makers Pty Ltd, a glass wholesaler, as he

had done on many occasions. At around the time that the order was placed, the company was experiencing serious cash-flow problems, and was unable to pay its debts. Jacob, who was

immersed in the research and development side of the business, did not pay sufficient

attention to the company’s accounts, and only realised that it was in serious trouble a month later.

When the glass was delivered in September, the company could not pay the account and it has remained unpaid. The manufacturer is now suing both the company and Jacob.

Advise Jacob of the extent (if any) of his personal liability. (8 marks)

*Question 12 (20 minutes)

Ace Cleaning Ltd (AC) was established in 2010. It specialises in providing office cleaning

services in the central business districts of several states. It has two directors (Ellie and

Abdul), and Ang Lee is the CEO. The company secretary is Renae. The company was very  profitable for the first few years of operations, and in February 2015 it entered into a contract with Cleaning Systems Ltd (CS) to purchase a new vacuum and washing equipment system for $5 million, payable over three years.

In April 2016, AC was facing financial difficulties. Indeed, it had the appearance of

insolvency: it couldn’t pay its cleaning suppliers and the bank was dishonoring its cheques

due to insufficient funds in AC’s bank account. Nevertheless, Ellie and Ang Lee committed

to a $300,000 advertising campaign, genuinely believing that it would help boost sales. Abdul was not involved in making this decision, as he had decided to visit his dying father back in Malaysia.

Unfortunately, the campaign did not produce the required results, andAC has been put into liquidation.

Advise Ellie, Abdul and Ang Lee whether they can be made personally liable for

the money owed for the advertising campaign. Refer to relevant cases and statutes. (10 marks)

*Question 13 (10 minutes)

Emilio and Fernando are directors of the company Planet Express Pty Ltd. Emilio’s friend

Amy promises Emilio a free trip to Europe for 3 weeks if Planet Express Pty Ltd buys shares to the value of $1 million in Amy’s company, Moonlight Pty Ltd. Emilio does not do any

research before deciding that Planet Express Pty Ltd should invest in Moonlight Pty Ltd,

because Amy is his friend, and he is enticed by the free trip. He does not disclose these

matters to Fernando. Moonlight Pty Ltd is very poorly run and goes out of business six weeks later. Planet Express Pty Ltd loses its $1 million investment.

Advise Emilio whether he has breached any of his obligations under the Corporations Act

2001 (Cth) in connection with Planet Express Pty Ltd investing in shares in Moonlight Pty

Ltd. Please ensure that you refer to relevant sections of the legislation and any relevant cases to support your answer. (5 marks.)

Question 14 (12 minutes)

Merle, Art and Lance are all partners in an accounting firm called “MAL Financial Services”,   operating in Victoria. Lance is also a director of a large company “Gardens Galore Ltd” (GG) that manufactures garden products and fertilisers. Unknown to the other partners, Lance has been regularly depositing money for GG (for various amounts) directly into MAL’s trust

account, withdrawing the proceeds and then wrongfully using the funds for his own personal use.

With Lance now broke and in Brazil, the Board of GG wish to bring legal action for the fraud against the remaining partners. Advise the Board. Cite relevant cases and/or statutes.

Question 15 (12 minutes)

Rebbo is a newly appointed CEO of a large public company. She is aware that amongst

various other statutory obligations and duties under the Corporations Act she has a duty under s 180 to exercise care and diligence in her role. However, she is very worried that she may be

liable for breach of this duty whenever she makes a poor or unprofitable commercial decision. Please advise her. Cite relevant cases and/or statutes.

Question 16 (40 minutes)

Michael and Andrew are brothers. They both have a keen interest in technology. They decide to form a business to pursue various technology projects, and decide that a company will be  the best business structure to adopt.

They establish CathXander Pty Ltd. Michael and Andrew are its only shareholders (taking  25,000 x $1 shares each), and they are also its only directors. Michael takes a much more active role in managing the company than Andrew. Andrew relies heavily upon Michael to  provide him with information about the company, particularly in relation to its finances, and its dealings with other companies. Andrew does not himself investigate the finances or transactions of CathXander Pty Ltd, other than by relying on Michael to provide him with this information.

In June 2017, Michael arranges for CathXander Pty Ltd to purchase a very large quantity of electronics components. The components are acquired from ErinElectronics Pty Ltd, a

company that Michael has a significant shareholding in. The transaction generates significant profits for ErinElectronics Pty Ltd. Michael signs the contract on behalf of CathXander Pty

Ltd; Andrew does not sign the contract, and is not aware of the contract, as Michael does not inform him about it.

The transaction puts CathXander Pty Ltd in a disastrous financial position. After paying for

the very large order, it is no longer able to pay its debts. When Andrew eventually finds out    (in August 2017), he is very worried – about his own potential responsibility, as well as about the failure of the business.

Have Michael and / or Andrew breached any of their directors’ duties? Discuss the duties owed by both Michael and Andrew.

Question 17 (10 minutes)

Matt and Tim operate a shop selling LED lights, bulbs and tubes, called “Bright Light LED    Lighting” (“Bright Light”). Their business is structured as a partnership. They agree that Tim is responsible for retail sales and customer service, and that Matt is responsible for purchasing, packing and storing.

Chu bought an LED light from Bright Light, which she installed in her garage. She was injured when the light exploded in the garage, leaving her unable to work for several weeks. The explosion also damaged her car. Matt packed the light for Chu’s order. He mistakenly packed it with the wrong transformer. Chu seeks damages to cover medical expenses, lost  wages and pain and suffering. She is also seeking compensation for the damage caused to her car. Tim argues that the damage is solely the responsibility of Matt.

Advise whether Tim can also be held liable to Chu under the law of partnerships. Refer to  relevant legislation and appropriate cases to support your argument. (Do not discuss what Chu would need to establish to succeed in an action for the tort of negligence.)

Question 18 (12 minutes)

Chris, Mitchell and Lachlan operate a herb farm in the Yarra Valley. Their business is structured as a partnership. They are equal partners in the partnership and have agreed that each may make purchases for the business up to the value of $5,000. Any purchase above $5,000 for the business must be agreed to by all partners in advance. One day, Chris decides on his own initiative to buy a second hand tractor in order to increase productivity. The tractor cost $25,000. He did not consult the others about the purchase and bought the tractor on credit with finance provided by the seller at a rate of interest five times the normal rate. When the others found out, they were furious.

Advise Mitchell and Lachlan whether they can be held liable for the purchase of the tractor under the law of partnerships. Please ensure that you use relevant authority in support of your answer (ie: cases and/or legislation).

Question 19 (28 minutes)

Yellow Leaf Pty Ltd is a commercial landscaping business. The directors of the company are Summer, Adam and Jackson. The market it operates in is highly competitive and Yellow Leaf Pty Ltd has been unsuccessful in securing the last 5 jobs that it has bid for and is experiencing trading losses. It has several unpaid invoices that are due for items such as pavers and water  features, for which it has received final demand notices. It has fallen behind in repayments for its major bank loan.

In an effort to save money, the directors buy a huge quantity of bluestone pavers on sale at 50% off their normal price, as well as discounted trees, from a new supplier. When payment is due 30 days’ later, Yellow Leaf Pty Ltd is unable to pay and has fallen further behind in its bank loan. The bank forces the company into liquidation.

Summer has been unable to attend the most recent board meetings as she is receiving treatment for  cancer. Adam and Jackson have attended all recent board meetings. While a director of Yellow Leaf   Pty Ltd, Jackson set up his own landscaping company, Green Fields Pty Ltd, without informing Yellow Leaf Pty Ltd. Jackson is the sole director and shareholder of Green Fields Pty Ltd. It turns out that

Jackson has been submitting tenders in competition with Yellow Leaf Pty Ltd, after seeing Yellow Leaf Pty Ltd’s tenders, and has been undercutting Yellow Leaf Pty Ltd’s prices to successfully win the

tenders for Green Fields Pty Ltd.

Jackson has also been using customer lists belonging to Yellow Leaf Pty Ltd to directly approach

customers of Yellow Leaf Pty Ltd and has been offering them discounted rates for future work, resulting in many customers dealing with Green Fields Pty Ltd instead of Yellow Leaf Pty Ltd. Jackson thought    he was engaging in fair competition and was acting honestly. He did not have any intention to deceive   Yellow Leaf Pty Ltd.

(a) Advise Summer, Adam and Jackson whether they can be held liable for the debts of

Yellow Leaf Pty Ltd under the Corporations Act 2001 (Cth). Please ensure that you refer to relevant sections of the legislation and any relevant cases to support your answer.

(16 minutes)

(b) Advise Jackson whether he has breached any of his obligations under

the Corporations Act 2001 (Cth) in connection with the establishment and operation of Green Fields Pty Ltd, even if he was acting honestly. Please ensure that you refer to relevant

sections of the legislation and any relevant cases to support your answer.

(12 minutes)

Question 20 (10 minutes)

Adam, Beatrice, and Cina are partners in a bakery business, Edible Everything. All are equal   partners and have agreed that each may make purchases for the business up to the value of  $5,000. In order to make a purchase above that amount, all partners must agree. Adam is in a shop when he sees a special deal for the Donut5000, an expensive donut press that usually    retails at $10,000. The machine costs $7,000 while on sale. Adam, sure that the other partners would approve of the purchase, went ahead and bought the Donut5000 without consulting the other partners first. The purchase was on credit, with finance provided by the seller at a rate of interest 10 times the normal rate. When the other partners found out, they were furious that Adam entered into such a bad financing arrangement.

Advise Beatrice and Cina whether they can be held liable for the purchase of the Donut5000   under the law of partnerships. Please ensure that you use relevant authority in support of your answer (ie. legislation and cases).

Question 21 (30 minutes)

Apex Ltd runs a series of high-priced hotels and casinos. The directors of the company are

Bianca, Carlos, and Dezi. Recently the directors decided to build a new luxury hotel, the

Elam. At the time when the directors decided to build the Elam, Apex had fallen behind in

repayments for its major bank loan. There had been a general downturn in casino attendance and the company had several unpaid bills, for which it had received final demand notices.

However, before deciding whether to build the Elam, the directors arranged for a report from Fiona, the company’s accountant. Fiona’s report stated that the company was in a sound

financial position.

Bianca arranged for the building of the Elam and sought three construction quotes. However, she awarded the contract to a company called Great Spire Pty Ltd, and ignored the other two quotes she received. Bianca holds many shares of Great Spire, but she did not tell Carlos or  Dezithis. Bianca is present for the meeting where the directors decide to award the contract  to Great Spire. Bianca ensures that Great Spire’s prices are competitive, so she does not

believe that she needed to disclose her connections with Great Spire. In light of the large expense of building a luxury hotel, the contract was very profitable for Great Spire.

Unfortunately, Apex is unable to pay the loan it took out to construct the Elam. The bank forces the company into liquidation.

a) Advise Bianca, Carlos, and Dezi whether they can be held liable for the debts of Apex

under the Corporations Act 2001(Cth). Please ensure that you refer to relevant sections of the legislation and any relevant cases to support your answer.

(16 minutes)

b) Advise Bianca whether she has breached any of her obligations under the Corporations

Act 2001 (Cth) in connection with awarding the building contract to Great Spire. Please

ensure that you refer to relevant sections of the legislation and any relevant cases to support your answer.

(14 minutes)

THE LAW OF DATA PROTECTION AND PRIVACY

*Question 22

Golden Retreat Spa (‘Golden Retreat’) is a chain of luxury wellness and spa retreats with locations

across Australia. The chain boasts an annual turnover of $2.5 million. Is Golden Retreat an APP entity, and therefore required to follow the APPs?

*Question 23

Golden Retreat offers a virtual relaxation program as one of their services. To improve the experience of clientele, Golden Retreat introduces an artificial intelligence (AI) system into the program. This AI

system utilises facial recognition technology to gauge the emotional responses of clients during virtual relaxation sessions and tailors the program based on the emotions of the client.

Assume for Question 2 that Golden Retreat is an APP entity and is therefore required to follow the

APPs. Is Golden Retreat allowed to use facial recognition technology in this way? Has Golden retreat met its obligations under the APPs or are they required to notify clients of the use of facial recognition technology?

*Question 24

When new clients arrive at Golden Retreat for a spa experience, they are presented with a new client  form. On the form, clients are asked a series of questions about themselves. The form requires clients to provide the following information: their name, phone number, age and medical conditions. On the

form, clients are informed that this data is collected for the purpose of safely providing their spa experiences.

a)   What type of information is Golden Retreat Collecting (personal, sensitive)?

b)   In collecting the age of clients, Golden Retreat notice they have a significant number of clients  50 years and older. They decide they want to use this information to contact customers in this   age group to market their anti-aging products. Can Golden retreat use the information collected on the new client form for this purpose?

Question 25

Billie, a client of Golden Retreat, is concerned about the information Golden Retreat have saved on file about her.

a)   Can Billie request access to the information Golden Retreat have saved about her?

b)   If the information is incorrect, can Billie request that the information be corrected? If so, is Golden Retreat required to correct the information?

Question 26

Three months after attending Golden Retreat for a spa experience, Billie starts receiving text messages promoting personalised relaxation package recommendations from Serene Escapes, a subsidiary of

Golden Retreat.

a)   Billie is concerned that Golden Retreat have breached its obligations under the APPs. What remedies are available to her in this situation?

b)   What options are available to the Australian Information Commissioner in this situation?