University of New South Wales

LAWS2385/JURD7285 – Equity and Trusts

Mid-Term Assignment Instructions – Term 3 2024

Weighting 30% of the total marks for Equity and Trusts. • 27% allocated to the Groupwork Memorandum. • 3% allocated to the Individual Reflection.

Due Date for Groupwork Memorandum AND Individual Reflection BOTH COMPONENTS: 9:00AM AEDT on Monday 14 October 2024.

  • AEDT: Australian Eastern Daylight Time (AEDT).

Word Limit for Groupwork Memorandum 2,500 words – INCLUSIVE OF FOOTNOTES

Word Limit for Individual Reflection 500 words – INCLUSIVE OF FOOTNOTES

Assessment Brief:

  1. The facts and events in the paragraphs below occur in New South Wales.
  2. Sandy is a self-employed fitness instructor and personal trainer. On 1 January 2023 Sandy is introduced, by a mutual business acquaintance, to Warren and Nancy. Warren and Nancy are the directors and shareholders of Ultra Pty Ltd (‘Ultra’), a local gym. After extensive discussions between Sandy, Warren and Nancy, later on 1 January 2023 Ultra and Sandy execute a written contract. The key terms of this contract are:
  • Sandy agrees to conduct, on behalf of Ultra, group spin classes for Ultra members. There is no additional cost to members for these spin classes as they are included in the price of their Ultra membership. Ultra agrees to pay Sandy $1,000 per month to conduct these group spin classes for Ultra members.
  • Sandy is permitted to recruit private clients from the membership of Ultra for the purpose of Sandy providing one-to-one fitness training to Ultra members. This one-to-one training is to be provided by Sandy on Ultra’s premises at an additional cost to the member, all training fees to be paid by the member directly to Sandy.
  • Sandy will remit to Ultra 30% of any one-to-one training fees paid to her by members.
  • The contract between Sandy and Ultra also includes the following clause E which states: (E). ‘Ultra acknowledges and agrees that Sandy has been retained solely as an independent contractor to provide group fitness classes to Ultra members and that Ultra’s engagement of Sandy is as an independent contractor and not in any other capacity including as a fiduciary.’
  1. Darcy is a member of Ultra. On 1 July 2023, after attending a group spin class at Ultra conducted by Sandy, Darcy approaches Sandy asking, ‘are you available to provide private fitness advice and training?’ Sandy responds in the affirmative, indicating that ‘the cost is $150 per hour. The usual arrangement is that the fee is paid by the client on the day of training in cash or via a bank direct deposit’. Darcy agrees to these terms. Darcy and Sandy further agree that they will meet weekly for one hour for Darcy’s one-to-one fitness training session.
  2. Sandy has a YouTube Channel and is notorious on social media as a ‘fitness influencer’ seeking to inspire, motivate and guide people with suggested exercise routines and wellness tips. Arnold is a member of Ultra and attends group spin classes at Ultra conducted by Sandy. At her group spin classes at Ultra, and in her one-to one fitness sessions, Sandy mentions her YouTube Channel as ‘an excellent source of guidance and information for you on your fitness journey.’ On 1 August 2023 Arnold subscribes to Sandy’s YouTube Channel. Hoping to become a bodybuilding legend, he diligently follows every suggestion Sandy makes on her Channel, including her exercise routines and dietary tips.
  3. Despite his diligence, Arnold is dissatisfied with his progress as a bodybuilder. On 1 November 2023 Sandy uploads a new video to her Channel in which she announces that ‘a new dietary supplement protein powder [called Bulk Plus] has been shown in manufacturer’s trials rapidly to enhance overall fitness and muscle definition.’ In her video Sandy says: ‘if you want to try and improve your physique, I recommend that you take this supplement. You won’t regret it. It will lead to the results you have been working towards.’
  4. On 1 November 2023 Arnold immediately completes an online purchase for 1 months’ supply of Bulk Plus for $1,000 from Sandy’s online store. Subsequently, Arnold purchases more Bulk Plus from Sandy’s online store at $1,000 each month for a further 5 months. In total, Arnold spends $6,000. On the payment screen for Sandy’s online store is a button which prominently states ‘by entering this transaction and [clicking here] I acknowledge that third parties may receive a fee.’ Arnold clicks this acknowledgement for each transaction.
  5. Strikers is a professional soccer team (‘Strikers’) which holds a corporate membership of Ultra for team members. Strikers contracts with Sandy to provide one-to-one personal training to team members in return for Strikers paying an annual retainer of $100,000 to Sandy. This payment of $100,000 is due to be paid to Sandy by Strikers’ management on 10 December 2023. Conscious of her obligations to Ultra, on 1 December 2023 Sandy signs a document entitled ‘Assignment of debt to Ultra’ which includes the following provision: (A)I assign to Ultra 30% of the debt owed to me by Strikers, the debt being payable on 10 December 2023. Sandy then delivers this document to Nancy and Warren as the directors of Ultra and informs them of the contact details for Strikers’ management.
  6. Bulk Plus is in fact a project of Sandy, Warren and Nancy which since 1 October 2023 has been manufactured in the basement of the Ultra gym. The recipe for Bulk Plus was created by Sandy, who keeps it a closely held secret. After the ingredients are measured and weighed by Sandy, Bulk Plus is mixed and packaged by Warren and Nancy in the Ultra gym basement, and then couriered to purchasers. Accustomed to their friendly, co-operative and trusting working relationship, Warren, Nancy and Sandy equally divide the revenue from sales to customers who purchase Bulk Plus from Sandy’s online store after meeting costs of production for Bulk Plus. Sandy deposits all moneys owing to Warren and Nancy in their personal bank accounts.
  7. On 1 January 2024 Darcy and Sandy meet at Ultra for Darcy’s regular personal training session. At the conclusion of the session Darcy says to Sandy: ‘I’m so sorry but I have no cash today and my home internet connection is not working. However, I am owed $150 by my brother Ben. I propose that I ask Ben to pay this money to you instead of to me. Would that be ok?’ Sandy replies: ‘sure, no problem. Inspired by the 8 start of the new year, Sandy, Warren and Nancy also meet on 1 January 2024 to discuss Bulk Plus. Sandy says: ‘given the volume of sales of Bulk Plus on my YouTube Channel, I think we ought to formalise our arrangements in relation to this product. Plus, we may want to pursue other opportunities.’ Nancy and Warren agree and immediately draw up a written agreement which is executed that day by all three (Nancy and Warren execute in their personal capacities and not as directors of Ultra). This agreement provides that the cost of ingredients, packaging, website maintenance, couriers, and marketing for Bulk Plus is to be borne equally by all three and that any resulting profit is similarly to be shared equally between them. Sandy agrees to deposit any funds owing into their personal bank accounts. Clause (Z) of the agreement states: (Z) ‘all parties acknowledge and agree that no party is a fiduciary for any other party to this agreement.’
  8. On 5 January 2024 Darcy telephones Ben. After explaining that she would like Ben to pay Sandy for her (i.e. Darcy’s) personal training, says: ‘please pay the money you owe me directly to Sandy’s bank account 1234.’ Ben says: ‘Ok sure’.
  9. On 1 March 2024 Warren and Nancy commence directly selling Bulk Plus in the Ultra gym to Ultra members at $1,000 per month. They promote the product on the Ultra website and via email communications to Ultra members. In the period 1 March 2024 to 1 September 2024 Warren and Nancy have each earned $50,000 from their direct sales of Bulk Plus after deducting the cost of ingredients, packaging, couriers and marketing.
  10. On 1 July 2024 Arnold’s physique has not improved. His doctor has advised that his weight gain of almost 15 kg is due to his consumption of Bulk Plus, but Arnold has not improved his muscle definition or fitness. Arnold entered an amateur bodybuilding competition but failed to rank in the top 10 competitors let alone win the hoped for $15,000 first place prize. Moreover, his doctor advises that his now recurrent headaches may well be the result of consuming Bulk Plus. Arnold is very disappointed and ceases to use Bulk Plus.
  11. On 1 September 2024 Warren and Nancy notice that Sandy has not been remitting any funds to Ultra on account of personal training fees. Warren and Nancy estimate that in the period from 1 January to 1 September 2024 Sandy has earned $50,000 in personal training fees. They also become aware that since 1 January 2024 Sandy has not been depositing any funds to their accounts reflecting their share of revenue from Bulk Plus purchases from Sandy’s online store. All parties agree that Ultra has paid Sandy the agreed $1,000 per month and that Sandy has conducted the required group spin classes for Ultra members pursuant to their contract dated 1 January 2023.
  12. Warren and Nancy approach your law firm for legal advice, both for themselves and on behalf of Ultra, as to their respective legal positions. Arnold and Darcy also consult your law firm for advice in relation to recent events. You and your teammates 9 are playing the role of associates at that law firm, working together. You may respond to the below questions in any order and structure your answer as you believe is appropriate. You are asked to provide advice on the following matters:

(a) Are there any equitable fiduciary obligations raised on the facts between any of Sandy, Ultra, Warren, Nancy, Arnold or Darcy?

(b) What are the scope(s) of any such equitable fiduciary obligation or obligations?

(c) Are there any breach or breaches of these obligations and does a defence apply?

(d) Briefly identify any equitable personal or equitable proprietary remedies which may apply to any breaches identified in (c)

(e) On 1 September 2024 Sandy asks Darcy for $150 for ‘the outstanding training fee for 1 January 2024.’ Who may enforce Darcy’s debt to Sandy and Ben’s debt to Darcy and why?

(f) What equitable personal or equitable proprietary remedies may Warren and Nancy pursue against Sandy for their share of Bulk Plus revenue. Why?

(g) May Ultra pursue Sandy for its share of her personal training fees. Why?

(h) As at 1 September 2024 Strikers has not paid Sandy her $100,000 retainer for personal training. Can Ultra sue Strikers upon the assignment signed by Sandy on 1 December 2023? Why or why not?

Note For the purposes of this question, you may assume that any negotiations conducted, or agreements entered into, by or on behalf of companies or other organisations were appropriately authorised.

Consider only the topics covered in Weeks 1-3 (inclusive) of Equity and Trusts including all reading listed in the Course Schedule and Reading Guide as well as the content of Seminars and Online Activities. Research beyond this ambit is not required and may lead you into error. END OF EXAM

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