Corporate Law Australia Issue 2022

Running Head: CORPORATE LAW 0
CORPORATE LAW
AUSTRALIA
Dell
[company name]

CORPORATE LAW 1
Question 1
Issue
The major issue in this caser scenario is, can BNZ bank enforce the mortgage over the building
of which both the husband and wife were the directors? Can this situation rely upon the
assumption of s129 of the Corporation Act? Can s128 (4) be an exception to the assumption
made in s129?
Rule
S 129 of the Corporation Act provides assumptions which can be made under s 128 of the same
act. There are 8 assumptions made under this section and those are as follows, first one deals
with a person who may be assumed as head of the company, who may be compiled with the
replaceable rules of the same (Australia, 2011). Second one assumes a person who according to
the information so received from ASIC appears to be the director or secretary of the company,
though been duly appointed or not as the same, or has that much authority to exercise and
perform the duties which had actually to be performed by the directors or the secretary of the
company (Australia, 2002).
Third one points out the assumption that a person may be assumed to be officer or the agent of
the company who is been duly appointed or has the authority to perform the same. Forth one
focuses on the point that a person may be assumed to be the officer or the agent of the company
if he properly performs its duties (knowledgebase, 2015). The next one suggests that a document
which is fully executed by the company, properly signed according to s127 (1), the person
signing the document without seal may be assumed to be the director or the other official of the
company ( Tomasic, , et al., 2002). Similar facts were also seen under the case of Soyfer v
Earlmaze Pty Ltd [2000] NSWSC 1068.in this case the Plaintiffs Mr. & Mrs. Soyfer had entered

CORPORATE LAW 2
into an agreement with the defendant Robert Matar, where they had to lend him money. The
documents were made and duly signed by the wife who was actually not the director but had
functioned or had performed the same duties as that of Mr. Soyfer. Document having proper seal
of the company affixed over it along with the adequate signature then the sign of the person can
be assumed to be the director or the official of the company. Great Investments v Warner [2016]
FCAFC 85; 243 FCR 516; 335 ALR 542; 114 ACSR 33 case determines the accurate facts as
mentioned in s129 (6) (Australia, 2002).
Seventh point suggests that a person may be assumed to be the officer or the agent of the
company who has the authority to issue a certificate or that copy of the document on behalf of
the genuine authority (Legal, 2016).. Last point focuses on the imposing the limitation which
may be generally imposed or applied for the purpose of this section. Whereas s 128 (4) suggests
that a person would not be entitled to make any assumption under s 129, if at the time of dealing
they had any idea or hint that the assumption may be an incorrect one (Library, 2018).
Application
In the given case scenario it was seen that Mr. and Mrs. Jones were the operators of the Jones
Hardware Ply Ltd one of the most popular store in the Katherine. Where Mrs. Jones was the
director of the company and Mr. Jones was also the director as well as the secretory of the
company. Then it was also seen that Mrs. Jones had applied for a loan of $300,000 from BNZ
Bank which was the same bank with which the company was dealing since last 15 years. The
application for the loan was given by stating that the fund will be used to raise the business of the
company and establish a new branch in Western Australia.
The shareholders of the new company would be Mrs. Jones and her friend. Mrs. Jones had
obtained a loan from the bank and all the other mortgaging documents and then she had affixed

CORPORATE LAW 3
the common seal of the company and made her best friend to sign in place of the secretary. The
lending bank had no idea relating to the intention of Mrs. Jones that she was going to start a new
company or any other. Thus s 128(4) will be applicable here as the bank had assumed the things
due to the buildup trust of 15 years so without conducting any further inquiry, bank had
sanctioned the loan agreement, similar facts were also seen in the case of Great Investments v
Warner.
The manager of the bank accepted the application and permitted them a loan without making any
inquiries as he knew both Mr. & Mrs. Jones form the prior. Thus the loan was funded to Mrs.
Jones on the basis of that the bank may take into consideration as security According to section
129 (1) Mrs. Jones was the director of the company so could comply with the replaceable rules,
the manager of the BNZ bank was assuming that she was applying for the fund to be used for the
betterment of their combined company, they had no idea that she was planning to startup with a
new company this was mentioned under s 129(2).
Conclusion
Thus to conclude with the above it can be determined that the BNZ bank can enforce its
mortgage for the loan over the building of ‘Jones Hardware Pty Ltd’ as they had assumed Mrs.
Jones to be the director or that face of the company who had always done her duties in an
adequate manner. So the bank has no knowledge of the intentions of Mrs. Jones and had hence
provided her loan thinking that it was taken for the betterment of their company irrespective of
conducting any further inquiries.
Therefore the issue in the given scenario is resolved in a way that it would be an affirmative
answer in case that whether BNZ bank enforce the mortgage over the building of which both the

CORPORATE LAW 4
husband and wife were the direct, assumption could be made under s 129 (2) and there was no
false intention or belief as seen under s 128(4).
Question 2
Issue
Whether Mrs. Jones be held liable for the breach of any duty of the director while establishing a
new company and approaching with the clients, is the major issue in this question.
Rule
According to s9 of the Corporation Act 2001, director is defined as a person who is appointed
validly as a director or an alternate director or a person who is not appointed as a director but
acts as same or works in accord to the wishes of the actual director (MinterEllison, 2019). A
director is considered as the face of a company so he also has a number of duties to be performed
such as firstly, duty of care and diligence under s180 of Corporation Act. Secondly he must
perform all its duties with a d=good faith mentioned under s 181. He must not misuse its position
is the next duty present under s182. And lastly he cannot use any secret information of the
company for its personal use mentioned under s183 (media, 2016).
Under s588 G it is settled down that it is the duty of the director to ensure that the company is
not trading or becoming insolvent. It is the duty of the director to take all the reasonable steps
under s344 for ensuring that the company complies with all its obligations relating to the keeping
of the financial records and other related documents etc. (Spink, 2019).
If the director breaches any of its duty then he may be held liable for diverse consequences such
as the criminal sanctions for the ones who have contravened its duty, has not acted in a good
faith, has misused the secret information or its position, or has dishonestly got involved into

CORPORATE LAW 5
recklessness shall be punished with imprisonment which may extend up to five years
(MinterEllison, 2019).
Civil sanctions may also be imposed upon the directors for the contravention of their duties. The
shareholders or the directors may be imposed with substantial fine for the breach so committed
by him. According to ASIC and the courts the directors may also be disqualified. There may also
be some serious commercial consequences such as the company may be scrutinized by the
investors as well as by the regulators and for the worst the company may also cease to exist
(Johnson & Brady, 2019).
Application
In this case scenario also it was seen that Mrs. Jones who was the director of the company had
misused her authorities and utilized her power and position and took a loan from the BNZ bank
without informing that she wanted to take a loan for starting up a new company. The loan was
taken keeping the older reputation or the property on stake, which directly indicated that she had
misused the secret information of the company for her personal use under the various above
mentioned sections of the Corporation Act 2001 i.e. s182, 183,344, 588 etc.
Conclusion
Thus to sum up with the above it can be determined that Mrs. Jones had breached the duty if the
director by misusing its position and power and had also not done its duty with due care and
diligence this could further held her liable for penalties which may be criminal, civil sanctions or
any other.

CORPORATE LAW 6
References
Tomasic, , R., Bottomley, , S. & McQueen, R., 2002. Corporations Law in Australia.
s.l.:Federation Press.
Australia, 2002. Corporations Act 2001. s.l.:CCH Australia.
Australia, 2011. Australian Corporations & Securities Legislation 2011: Corporations Act 2001,
ASIC Act 2001, related regulations. s.l.:CCH Australia Limited, .
Johnson, M. & Brady, M., 2019. Corporate governance and directors' duties in Australia:
overview. [Online]
Available at:
https://content.next.westlaw.com/Document/I2dfb03941cb111e38578f7ccc38dcbee/View/
FullText.html?contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1
[Accessed 24 09 2019].
knowledgebase, 2015. Companies: Assumptions under section 129 of Corporations Act. [Online]
Available at: https://www.mentorbylawyers.com.au/knowledgebase/companies-assumptions-
under-section-129-of-corporations-act
[Accessed 24 09 2019].
Legal, E., 2016. Reliance on documents signed by companies: When can you assume?. [Online]
Available at: https://eralegal.com.au/2016/08/01/relying-on-documents-signed-by-companies/
[Accessed 24 09 2019].
Library, T. L. T. L., 2018. Australian Broadcasting Corporation Act 1983 (Australia) (2018
Edition). s.l.:CreateSpace Independent Publishing Platform,.

CORPORATE LAW 7
media, 2016. General duties of Directors. [Online]
Available at: https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/
director-tools/pdf/05446-6-2-duties-directors_general-duties-directors_a4-web.ashx
[Accessed 24 09 2019].
MinterEllison, 2019. Doing business in Australia| Directors' duties. [Online]
Available at: https://www.minterellison.com/articles/doing-business-in-australia-directors-duties
[Accessed 24 09 2019].
Spink, R., 2019. The responsibilities and duties of a company director. [Online]
Available at: https://www.burges-salmon.com/news-and-insight/publications/the-responsibilities-
and-duties-of-a-company-director/
[Accessed 24 09 2019].