Legal Aspect Case

Posted: November 28th, 2013

Legal Aspect Case









Legal Aspect Case

            The plaintiff is an investor whose business involves buying out businesses in financial problems then utilizing his management skills to rejuvenate the company into profit making. In other instances, he breaks up the firms and sells the assets for a profit. For this case, the plaintiff wanted to purchase the shares of Cabinet Manufacturing Limited, which was in financial problems due to high debt load. To assess the technical and financial viability of the company he hired two consultants, Harris and Danzil. Harris, the business consultant, was the one who recommended Danzil, the engineer, to assess the condition and value of the manufacturing machine. Harris main task was to assess the firm and negotiate the price of the shares on behalf of the investors.

During the company examination, the defendants, Harris and Danzil, realized the company represented a good investment with improvements in the manufacturing process and if the equity-debt ratio could be controlled. They then established a corporation with the sole aim of buying out company if the investor was not interested in it. A few days latter, they submitted a written report the investor indicating the business to be worth $3.1 million. The investor fulfilled part of his bargain by paying them each $5,000 a few days later he placed a bid to purchase the company at $3.0 million, which was rejected immediately. Before he could bid again, the defendants’ corporation placed a bid of $3.1 million and acquired the company. The investor decided to sue for damages after he discovered that the corporation was owned by the defendants.

According to the Canadian law, the plaintiff can seek damages from the defendant for breaking the law of fiduciary obligation/duty. The legal system recognizes the special relationships where one party is supposed to lookup for the interests of the other. Fiduciary duty is legal relationship of trust between two or more parties. It prohibits any profit making or conflict of interest that extends the boundaries of the relationship. The issue of the case is that the defendants breached their fiduciary duty when they purchased the company without letting the plaintiff to have the chance to exhaust his financial means.

The argument for the plaintiff is to prove that his fiduciary rights were abused and he suffered damages because of this act. To justify his case he must show; first, the defendant (fiduciary) had the ability to exercise power; secondly, the actions of the fiduciary affected the interests of the plaintiff; thirdly, the plaintiff was in a vulnerable position in the hands of the defendant; fourthly, show that there was conflict of interest between the parties of the fiduciary relationship. On the other hand, the defendant has several defenses to prove his innocence. First, he can show that he only acted after the defendant had abandoned the project. Secondly, he can prove that he did not have the intention to cause any damages to the plaintiff. The damages were unforeseen during the time of action. Thirdly, the act was done with the consent of the plaintiff.

Remedies for breach of fiducially duty include constructive trusts involve cases where court imposes a responsibility on the fiduciary to hold money or any other valuable in safekeeping until it is transferred to the rightful owner. Accounts of profits is applied mainly when an employee runs a parallel company and makes huge profits that can be attributed to his fiduciary relationship with his employers company. Since account of profits is very difficult to calculate, the plaintiff might request for compensatory damages.


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