Business Law: Mortgage Enforcement and Director's Duties

Running head: BUSINESS LAW
BUSINESS LAW
Name of the Student
Name of the University
Author Note

BUSINESS LAW1
Table of Contents
Question 1......................................................................................................................2
Question 2......................................................................................................................5
References......................................................................................................................7

BUSINESS LAW2
Question 1
Issue
The issue that needs to be determined here is that whether BNZ bank could enforce its
mortgage over the asset of the Jones Hardware Pty Ltd vouched by Mrs Jones against the
loan that she took from the bank in order to expand her company to Western Australia.
However, her intention is to start a new company with her friend which would be a separate
entity and not related to the existing company and eventually leave her husband who is the
other director of Jones Hardware Pty Ltd.
Rule
The case of Hodgson v Wollard is a recent where the court discussed about the
entitlement of the third party to make assumption while they deal with companies1. In this
case, one of the directors got away with a loan agreement by forging a signature. The loan
agreement was with the ANZ bank who was deceived with a forged signature while the bank
trusted the company on the basis of section 129(5) of the Corporations Act 2001(Cth) which
directs a person to presume a document duly executed by the company as a significant
document on the basis of which an agreement could be executed. The person is also to
presume that anyone who signs such document and claims to be a director or company
secretary of the company shall be true to his belief and shall be considered right to have
executed an agreement based on such duly executed document2.
Section 129(2) of the Act directs a person to assume that a person who appears to be a
director or a company secretary as per the formation of the company and as known to the
ASIC has been duly appointed and therefore shall have the authority to exercise his rights and
1 Hodgson v Wollard [2016] NSWSC 188.
2 Harris, Jason, Anil Hargovan, and Michael Andrew Adams. Australian corporate law. Vol. 2. (LexisNexis
Butterworths, 2013).