HYPOTHETICAL ILAC QUESTION: (20 marks)
In June 2017, three brothers named Luke, Chris and Liam opened a Mexican restaurant called Thundering
Tacos (“TT”). They agreed that Luke would be in charge of the day-to-day running of the restaurant, Liam
would be in charge of buying ingredients and Chris would be responsible for managing staff. They also
agreed that any expenditure involving more than $5,000 would require joint approval. The restaurant
became an overnight success, with customers lined up outside the restaurant each night, keen to try TT’s
famous “Godly Guacamole”.
One Monday morning in April 2019, when Luke arrived at TT to open the restaurant, he noticed that the
kitchen and dining area were messier than normal, and various ingredients were missing from the fridge.
Luke knew that the kitchen had been left clean and tidy on Sunday night before he left, and Liam confirmed
that the fridge had been fully restocked before closing on Sunday. The same thing happened again a few
days later, and then a few days a week for the next few months. Becoming increasingly suspicious, Luke and
Liam decided to install a webcam inside TT to find out what was happening after hours. The webcam
revealed that Chris had been using the restaurant after hours to run his own small pop-up restaurant called
“Marvel’s Mexican”, using ingredients and equipment purchased for use at TT. Chris had been receiving
payment from his customers in cash, and pocketing the cash for their own purposes.
Luke and Liam also discovered a large stockpile of cans labelled “Godly Guacamole” at the back of the
storeroom. The label on the can stated that the guacamole was made using “Thundering Taco’s world
famous secret recipe”. Pre-prepared sauces were never served at TT, the kitchen staff always made the
guacamole fresh each day.
Unfortunately, before Luke and Liam had the opportunity to confront Chris about what they had discovered,
they received a text message from Chris saying that he was “on the plane and off to Hollywood to become a
famous movie star”.
In July 2019, Luke receives an invoice from Loki’s Logistics (“LL”) for $40,000. The invoice included the cost
of manufacturing 1,000 cans of Godly Guacamole, and the creation of an advertising campaign and
marketing materials to promote the canned product. Luke and Liam have refused to pay the invoice, arguing
that they are not liable as they did not sign the original contract with LL. LL claims that Luke and Liam are
liable, as the contract was signed by Chris, on behalf of TT.
Using only the Partnership Act 1891 (Qld) and the common law, advise Luke and Liam as to their potential
liability for the contract with LL, and whether they have any rights against Chris. You may assume that Chris
will return to Australia in August 2019, and Luke and Liam intend to take action against him on his return.