2105AFE Introduction to Business Law

Question:

Hypothetical ILAC Question:

Kathy is a local Brisbane resident and she is the founder of ‘Lara Jean Pty Ltd’, a Brisbane-based company that creates activewear for women. With the trend of being healthy and going to the gym increasing, demand for activewear has been rapidly intensifying and Kathy has been able to open 3 stores across Queensland.

Since Lara Jean has been so successful, Kathy wants to expand the company interstate and obtains advice from Peter, the sole owner and financial advisor of ‘Precision Financials’. Peter started his sole practice after having 20 years of experience as a finance advisor and is extremely well known for his professional services for small business and retail chains. Kathy has no experience in running a business in States other than Queensland, as it is where she grew up and she needs advice as to the company's position and whether it's ready to make the interstate move.

During their initial meeting, Peter glances at Lara Jean’s Financial Statements from the prior year for the first time and then advises Kathy that her company is in a great financial position to make the move interstate. In the same meeting, he also tells Kathy that Western Australia is the perfect market for her to enter into as he believes that gyms in Perth are opening in record numbers and that her designs would sell "in no time".

Kathy, being cautious about opening a new store so far from Brisbane, asks whether she should start small with a boutique store and whether Peter needed to do some more analysis on her company before giving his final advice on her proposed move to Western Australia. Peter replies by telling Kathy to have more confidence in her designs and to open a grand store at the largest shopping centre in Perth. Peter reassures Kathy that he knows the retail market inside out since that is his speciality. He then states that normally he would have to perform a more thorough financial analysis of Lara Jean, such as providing a written review and cashflow forecasting of the potential profits of Lara Jean in Perth, however, given the fact that Lara Jean’s profit in the last year would pay for the new store in Perth, he does not consider it a risk.

Peter then advises that Kathy should consider designing, manufacturing and selling sport shoes to go with her active wear since it's the "same sort of thing" anyway. Peter believes that she should launch her new line of shoes at the grand opening of her new store in Perth, as that would be a great marketing strategy. Based on this advice, Kathy invests $200,000 from Lara Jean’s profits to create a new designer shoe line and $300,000 on the fit-out and rent for the new store in Perth's largest shopping centre.

After 2 months of the store opening, Kathy realises that there are not many customers coming into her store and her shoes are not selling at all. She is also competing with a Perth resident, Margot, who owned ‘Mumu Melons’, another active wear company that caters for both men and women. Kathy wants to terminate the lease for the Perth store and only concentrate on Queensland as she is now operating at a loss. Kathy wishes to sue Peter for $500,000 in damages in the Queensland courts as she believes her financial loss was due to Peter's advice.

Task

Advise Kathy on whether she is entitled to claim damages from Peter. Using the ILAC method, advise Kathy by making reference to any relevant provisions of the Civil Liability Act 2003 (Qld) as well as the relevant common law.

General Instructions:

Students do not need to write a full ILAC answer for these Short Response Questions. Students are only required to write the ‘Application’ and ‘Conclusion’ portion of the ILAC answer and refer to the relevant sections of the Civil Liability Act 2003 (Qld) and/or case law in your answer. Students do not need to write the ‘Issues’ or ‘Law’ portion of the ILAC answer.

Question 1:

Forestdale Shire Council is responsible for Stormy Beach in Rockhampton, Queensland. It’s a lonely beach with a picturesque stretch of sand and surrounded by rocks, and it is not patrolled by any lifesavers. Harry and Ronald are walking down the beach one day when Harry, feeling confident although he is a weak swimmer, plunges into the large waves and starts swimming towards a nearby island. Harry is immediately caught in a strong current and pulled underwater. Ronald dives into the water and rescues Harry, but Harry almost drowns and suffers permanent injury. Harry wishes to sue Forestdale Shire Council for $175,000 as compensation for his injury.

Advise Forestdale Shire Council whether it owes a duty of care to Harry.

Question 2:

Ted orders a pizza from an Italian restaurant in Brisbane, owned by Johnny, who is also the chef. The pizza contains rotten pineapple, and as result, Ted suffers food poisoning. His symptoms do not go away, and in fact, worsen over the following week. Ted visits the hospital and is advised by the doctors that the food poisoning has worsened a pre-existing

acid imbalance in Ted’s stomach, triggering a stomach ulcer that is going to require extensive medical treatment, which is likely to cost approximately $800,000. Can Ted recover the cost of this medical treatment from Johnny? In your answer focus on whether or not the harm suffered by Ted was caused by Johnny’s breach of duty.