ASSESSMENT ITEM 3 – CASE STUDY
Bruce and Belle are long-time friends: they went to university at the same time and studied a Bachelor of Business & Commerce. Twenty years have passed since graduation, and Bruce’s life has changed a lot. Last year he divorced his wife and six months later he won $10 million in the lotto.
Belle was never married Nor had children – her life was devoted to climbing the corporate ladder. She is the CEO of the Northern Territory’s largest real estate company, Sell-o-rama, but she has been worn into the ground with working 6 days a week, 12 hours a day for a long time.
Bruce meets her for lunch one day and raises the idea of a business venture with her. He suggests that they start up their own real estate agency (Bruce has a real estate licence, and so, incidentally, does Belle – though she does not sell, as such.) Belle resigns her position at Sell-o-rama, well aware that she is not able to use the client lists or any of the information from her ex-employer. Indeed, her contract prevents her from working within the entire Northern Territory as a real-estate agent for a period of 5 years after her resignation.
After working through all of the options available, including possible franchises, they decide to start a brand new business, which has no history or obligations to anyone. They don’t write up a business agreement between themselves, but agree over several coffee meetings that Bruce will put in the “financial capital” ($100,000 to begin with) and Belle will use all her skills and knowledge from her previous job as the “intellectual capital”, as she has no significant assets or cash to invest (Belle spent most of her income on posh holidays and designer clothes.)
Their business is called Pinnacle Real Estate, as they intend to only sell high-end properties. Their slogan is this:
“Pinnacle Real Estate, forget the sell-o-drama, and make the experience of selling your house a dream”.
They use a photo of Belle in all of their advertisements (see the woman holding the folder below). The second photo – of the man – is the one that was (and still is) used by Sell-o-rama in their advertising.
Within the first week they are both selling houses like mad – business is booming! Most of the clients come from the old business, as they received targeted marketing – Belle knew the Facebook pages that were most popular with her previous clients and advertised on those pages.
As soon as the ads of their new business hit the papers, the new CEO of Sell-o-rama – Ivan Torrible – becomes aware of the business. After a few days, he goes to Sell-o-rama’s lawyer and asks for legal advice.
You are the legal advisor. Please give advice to Mr Torrible on the facts above, identifying all of the possible issues.
As the legal advisor, write a letter to Pinnacle Real Estate setting out Mr Torrible’s concerns, and what action/s you intend to take on behalf of Sell-o-rama.
Give advice to Pinnacle Real Estate about who is likely to be sued, and whether they have any defences.