Reference no: EM131008420

Case study - The Swimming Stadium

Mike is the new owner of a small swimming stadium in Perth. As this is his first business venture he decides it would be prudent to form a company through which he operates the business. His second order of business is to hire a stadium manager to run the business on a day to day basis. He meets with Kieran, who has the experience that he is looking for, and appoints him to the role.

Getting to work quickly, Kieran does the following:
- hires two lifeguards,
- enters into an agreement with Cola - Cola for Powerade to be the only sports drink served at the stadium, and
- Engages a company, Best Renos, to renovate the spa and sauna facilities in the stadium.

Over the next couple of weeks the following things happen:
- Mike decides that he wants to add a gym to the rear side of the stadium and applies to the Perth Council for building approval. The Council rejects his application on the basis that Mike had previously been rejected for an application to build a second story on his home.

- A young swimmer at the stadium purchases one of the bottles of Powerade, only to find a dead bee floating in the drink. He shows his mum the contaminated drink and she complains to Kieran about the incident.

- A number of expensive materials to be used for the renovation are stolen from the car park, where Best Renos unloaded and left the materials. Kieran and Mike are furious with Best Renos given that they explicitly instructed them to securely store these materials in a shed that was provided specifically for that purpose.

- Joe, who is responsible for pool maintenance, forgets to add the required amount of chlorine and salt, with the effect that the pools are unsafe to swim in. A number of swimmers get very sick as a result and need to receive medical treatment. Mike receives legal letters from these members demanding reimbursement of their medical costs.

1. Which of the following areas of law are relevant to the case study? Support your answer by identifying which facts make a particular area of law relevant to them.
• Contract law
• Tort law
• Consumer law
• Corporations law
• Criminal law
• Property law
• Administrative law

• Mike is the new owner of a small swimming stadium in Perth.
o Property Law (Mike has property rights in the land that he has purchased).
o Contract Law (principles of contract law apply to the contract of sale of land that Mike would have had to sign to acquire the property).

• As this is his first business venture he decides it would be prudent to form a company through which he operates the business.
o Corporations Law (Mike will have to register a company).

• His second order of business is to hire a stadium manager to run the business on a day to day basis. He meets with Kieran, who has the experience that he is looking for, and appoints him to the role.
o Contract Law (Mike enters a contract of employment with Kieran - Employment Law is a recognised area of law as well, but is not that relevant at this stage because Kieran has just been engaged).

• Getting to work quickly, Kieran does the following:
o hires two lifeguards
- Contract Law (Kieran has entered into contracts of employment with the lifeguards on behalf of the company - employment law marginally relevant as above).

o enters into an agreement with Cola - Cola for Powerade to be the only sports drink served at the stadium
- Contract Law (This is a contract for the supply of goods. Also, the wording of the questions hints at a licence being involved, which might be contained in a different form of agreement, but this involves contract law nonetheless)
- Consumer Law? The company through which the sports drinks were purchased (Mike's company) would not be deemed to be a ‘consumer' because these goods were acquired for the purpose of being re-supplied.

o Engages a company, Best Renos, to renovate the spa and sauna facilities in the stadium.
- Contract Law (The contract here is one for building works)
- Property Law (As the owner of the property, Mike has the ability to renovate his property, but this is subject to limitations).
- Consumer law - possibly (Services are being provided here, but in a business context which may preclude the consumer protection provisions from applying).
- Company Law? Yes, but peripheral issue.

• Mike decides that he wants to add a gym to the rear side of the stadium and applies to the Perth Council for building approval. The Council rejects his application on the basis that Mike had previously been rejected for an application to build a second story on his home.
o Property law (As the owner, Mike can make this addition provided he has the room, money and the council approves).
o Administrative law (The council is a government entity whose decisions are subject to this area of law. On the face of it, it would appear that this decision by the council can be reviewed on the basis that their reasons for rejecting the application were not sound and were based on past events rather than the substance of the application).

• A young swimmer at the stadium purchases one of the bottles of Powerade, only to find a dead bee floating in the drink. He shows his mum the contaminated drink and she complains to Kieran about the incident.
o Consumer law (Coca-Cola have contravened the consumer law provisions by supplying goods that are unfit for the purpose of drinking).
o Tort law (Coca-Cola have a duty of care to consumers of their products which they appear to have breached in this instance. If an employee at the stadium interfered with the drink in some way, thus allowing the bee to enter, then liability in negligence could shift to Mike's company - Hypothetical example).
o Contract law (exchanging the bottle of Powerade for money constitutes a consumer contract).

• A number of expensive materials to be used for the renovation are stolen from the car park, where Best Renos unloaded and left the materials. Kieran and Mike are furious with Best Renos given that they explicitly instructed them to securely store these materials in a shed that was provided specifically for that purpose.
o Property law (the materials are property that Mike had presumably already paid for. Best Renos therefore has an obligation to deal with them responsibly and ensure that they are securely stored).
o Criminal law (the thieves have committed a crime by taking property that is not theirs).
o Tort law (Best Renos appear to have acted negligently by leaving the materials unsecured in the car park, after being explicitly instructed by Mike to securely store the materials in a shed that was provided specifically for that purpose).

• Joe, who is responsible for pool maintenance, forgets to add the required amount of chlorine and salt, with the effect that the pools are unsafe to swim in. A number of swimmers get very sick as a result and need to receive medical treatment. Mike receives legal letters from these members demanding reimbursement of their medical costs.
o Tort law (In his capacity as employee of the stadium, Joe appears to have acted negligently here with his actions causing harm to others. With vicarious liability, Mike's company that owns the stadium could be made liable for a negligent action of an employee. Also, there are inevitably employment law consequences here as Joe has not fulfilled the terms of his employment by acting the way he has - could justify immediate dismissal or only a warning).
2. With reference to the facts of the case study, describe how the relevant areas of law serve the following functions:
- Ensures reasonable predictability in daily life;
- Encourages and discourages certain conduct;
- Grants rights and powers to individuals and groups of people;
- Imposes obligations on individuals / organisations to meet their legal responsibility;
- Allows for the enforcement of recognised rights and duties;
- Provides remedies when an injustice has been done.

• Ensures reasonable predictability in daily life
o The employment contracts with Kieran and the lifeguards gives Mike peace of mind that those functions within his business are being taken care of, which is important for him because it frees his mind to concentrate on other things with the business. Similarly, with the contract for the supply of the Powerade, by entering this agreement, Mike knows that he doesn't need to source these drinks elsewhere because his stock is being taken care of on a frequent basis.
o Dead bees aside, consumer law ensures that the standard of the goods and services supplied, match the expectations of consumers. That gives consumers confidence that products do what their makers say they will do, and services will be able to deliver most, if not all, of the expected benefits. From an economic perspective, the flow on effects of this are important.

• Encourages and discourages certain conduct
o Criminal law discourages people stealing property, like building materials, and imposes harsh penalties as an incentive not to engage in that conduct.
o Contract law encourages economic activity because people / organisations know that they can take risks in hiring people, entering into contracts for goods and services, and that the law will side with their position in the event that the other contracting party violates the terms of the agreement.
o Tort law encourages individuals to regulate behaviour that has the potential to impact others. Had Best Renos known about what their duty of care was, they would have likely taken greater steps to ensure the secure storage of the building materials.
o Corporations law would discourage unethical behaviour by Mike who has legal duties and responsibilities as the figurehead of his company.

• Grants rights and powers to individuals and groups of people
o Property law gives Mike the power to make renovations to the property that he owns.
o Administrative Law gives people who are directly impacted by official decision making bodies the power to legally challenge those decisions.

• Imposes obligations on individuals / organisations to meet their legal responsibility
o Administrative law imposes obligations on official decision makers to make decisions with reference to all relevant evidence. In our case example, the Perth council appears to have not made a valid decision by referring to past information that was not relevant to the approval application before them.
o Consumer law imposes obligations on companies like Coca-cola to produce goods that are safe to consume and fit for the purpose they are bought.

• Allows for the enforcement of recognised rights and duties
o Contract law allows an aggrieved party to a contract to enforce it against the other party who has breached its terms. In our case example, this would be Mike who could enforce the contracts against Coca-cola and Best Renos for their conduct that would not be up to the standard of performance required under the respective contracts.
o Corporations law allows for penalties to be enforced against company directors (in Mike's position) who violate the legal duties imposed on individuals who occupy that position.

• Provides remedies when an injustice has been done
o Contract law provides remedies such as damages for someone in Mike's position who has been aggrieved by the conduct of the other party to the contract.
o Property law would provide a remedy for Mike if a neighbour tried to interfere with his ability to exercise the rights that he has in his land.

3. What are some steps that Mike and Kieran could have taken to guard against the legal risks that they have encountered?

• Mike doing research about what incorporation as a company means for his business.
• Taken out insurance for the materials that were stolen, and public and products liability insurance.
• Done their due diligence on Best Renos and got an independent assessment of their service quality. Made the instructions to securely store the materials a written term of the contract.
• Completed frequent quality checks on the shipments of Sports drink from Coca-cola.
• Conduct a reference check on Joe to better gauge whether he would be suitably fill the pool maintenance role.
• Institute a checklist / log for Joe to follow when servicing the pool / Observe him at work to make sure he is doing the job properly.