Corporate Law Question Answer 2022

Running head: CORPORATE LAW
Corporate Law
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CORPORATE LAW
Table of Contents
Explanation of Whether BNZ Bank can enforce its Mortgage over the Building...........................3
Discussion of Whether Mrs Jones Breached any Director Duty.....................................................7
References......................................................................................................................................10
Bibliography..................................................................................................................................12
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CORPORATE LAW
Explanation of Whether BNZ Bank can enforce its Mortgage over the Building
Issue
The issue to be addressed is determining whether Bank of New Zealand (BNZ) can enforce the
mortgage over the building.
Rule
Referring to Section 129 of the Corporations Act, it is evident that “a person may assume that
anyone who appears, from information provided by the company that is available to the public
from ASIC, to be a director or a company secretary of the company: (a) has been duly appointed;
and (b) has authority to exercise the powers and perform the duties customarily exercised or
performed by a director or company secretary of a similar company” (Australasian Legal
Information Institute, 2019). According to section 128 (4) of this particular Act, the person will
not be able to make any assumption or exercise any kind of the power under the section of 129, if
they suspected that the assumption made by the party was not correct during period of dealing
(Australasian Legal Information Institute, 2019a). Section 123 of the Corporation Act 2001 also
stated that the common seal is a rubber stamp where the name of the company and the
association number are mentioned. It is essential to have the common seal of the company, as it
also plays the role of the signature while executing the document (Australasian Legal
Information Institute, 2019b). This can be referred to the recent case of Santander UK PLC v. (1)
Ashley Shaun Fletcher and (2) Paula Denise Fletcher [2018] EWHC 2778 (Ch), which offers a
useful reminder on mortgage enforcement under undue influence.
According to Section 127 (1) of the Corporations Act, the company may proceed with the
document without putting common seal in following cases, if the documents consist of the
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CORPORATE LAW
following signatures, which are of two directors, one secretary and one director of the company,
or in case of proprietary company the signature of sole director or secretary. On the other hand,
Section 127 (2) of the Corporations Act confirmed that “a company with a common seal may
execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by”
the members which are mention in Section 127 (1) (Australasian Legal Information Institute,
2019c). These are the rules that had been implied in the case of ‘Jones Hardware Pty Ltd’ and
BNZ.
Application
After analyzing the case, it is understood that Mr. and Mrs. Jones were the directors of the
company named ‘Jones Hardware Pty Ltd’, a hardware store popular in Katherine. Mrs. Jones,
who is the director of the firm, had visited the BNZ bank for taking a loan of $300,000 in order
to establish a new company with her friend. However, she had a good relationship with the bank
manager, as it possessed a close association with the hardware company from the past 15 years.
She applies for a loan stating a reason for expanding their business in Western Australia.
However, it was decided that Mrs. Jones would be the director and her best friend would be the
shareholder of the new establishment. Bankers considered the asset of the company to be the
security for the loan, which was the building where the company would operate.
Mrs. Jones affixes the company’s common seal on the mortgage document and her friend signed
in the designation of secretary and receives the advance from BNZ Bank. As per the scenario, it
could be understood that Mrs. Jones is in the designation of director and has power over the
company to make the required decision. Thus, she took the decision on behalf the company that
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