LEGT2741 Assignment
There are three main parties to this case; Flywell Ltd (F), the parent company, Jetover Ltd (J), the subsidiary, and the Australian Pilots Association (APA) which is representing the 200 pilots currently employed by J. F incorporated J as a wholly owned subsidiary of F and appointed four directors for J from the six directors of F. Two hundred of F’s pilots were made redundant and immediately rehired by J on lower wages and entitlement previously enjoyed at F. New pilots hired by F receive 20% more pay and entitlements for the same work than pilots of J.
The issue here is that are the original contractual entitlements received at F applicable to the pilots of J?
Firstly it must be emphasised that through …show more content…

Justice Atkinson’s decision in Smith Stone & Knight Ltd v Birmingham Corp provides the criteria for determining an agency relationship. There are 6 criteria that must be present to infer an agency relationship between F and J:
1. Were the profits treated as the profits of the parent?
All the profits of J were transferred to F in the form of a dividend. However, there is no evidence that F treated the profits of J as its own prior to receiving the dividend. Applying the decision in Industrial Equity Ltd v Blackburn , it can be argued that F and J are separate legal entities in a corporate group because F only recognised J’s profits as its own after the dividend was paid out. Even though this is the case in principle, the existence of J as nothing more than a puppet of F, should allow the assumption that F considered J’s profits its own.
2. Were the persons conducting the business appointed by the parent?
The 4 directors of J were appointed from the Board of 6 directors of F.
3. Was the parent the head and the brain of the trading venture?
F is the only shareholder of J and thus holds all the voting rights for the appointment of the directors of J that will manage the company.
4. Did the parent govern the adventure, decide what should be done and what capital should be embarked on the venture?
F incorporated the company, appointed directors to J from its own Board and receives all of J’s profits.