Legal Remedies for Shareholders and Company Contracts

Bishal Gyawali
11615943
Assignment – 2
Bishal Gyawali
11615943
1

Bishal Gyawali
11615943
Question 1
Issues
Is JCI Ltd. Liable for contract with Anglo-American entered by Kruger?
Law
All the laws relating to company contract is governed by Statutory
regime rather than common law. Questions of this contract must be
answered referring to the provisions of the Act and cases. Out come of
the case of Royal British Bank v Turquand can be found in s128-129 of
the Corporations Act 2001 (Cth), elaborates all the necessary rule to
understand the importance of law and cases, which is known as
Turquand rule. Under s128(1) of the Corporations Act 2001 (Cth), people
dealing with company has right to make assumption, which contains
The first assumption relevant to this problem is that power vested to a
person by a company can be supposed by a 3rd party to have a power a
normal person in that position normally have (s 129(3)) of the
corporations Act 2001 (Cth). This applies even if the company
constitution imposes limits on that person’s authority, because s 129(1)
of the Corporations Act 2001 (Cth), entitles 3rd parties to assume that
company agents are acting in accordance with the company constitution.
However, it should be noted that authority under s 129(3) of the
Corporations Act 2001 (Cth), is defined by the nature and scope of a
company’s business – in other words, that a person has such authority
as would be necessary to discharge his or her role in a company of that
type. Furthermore, outsiders cannot make the assumptions under s 129
of the Corporations Act 2001 (Cth), if, under s 128(4) of the Corporations
Act 2001 (Cth), if they have knowledge or suspicion of the assumptions
were not true. In this context, the courts in Oris Fund Management Ltd v
National Australia Bank and Sunburst Properties Pty Ltd v Agwater Pty
Ltd have held that the term ‘suspected’ in s 128(4) of the Corporations
Act 2001 (Cth), must be interpreted subjectively, not objectively – it is
what the particular 3rd party actually suspected that counts.
Similarly, in the case of Northside Developments Pty Ltd v Registrar-
General court held the transaction susceptive under the company liability
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Bishal Gyawali
11615943
in contract for not disclosing the matter related to mortgage as a security
for a loan. Where third party could not rely on Turquand rule.
Application
Kruger had implied authority to engage in contracts relating to sales
because of his position as heavy machinery sales Manager. Although
the company constitution allows him to sale an ore smelter costing $ 3.5
million. Oppenheimer would still be able to assume authority to contract
lies on Kruger because of the entitlement to assume that company
agents are acting in accordance with the company constitution contained
in s 129(1) of the Corporations Act 2001 (Cth). This, coupled with
Kruger’s appointment as sales Manager, meant that, under ss 128(1)
and 129(3) of the Corporations Act 2001 (Cth), Oppenheimer first
impression entitled to assume that he had the authority that would
normally go with that position in a company similar to JCI. The question
is whether such a contract would have lain within Kruger’s implied
authority. Given that Kruger department is not making profit as expected
also he is making too many mistakes. There is a chance of internal
changes in a lunchtime board meeting.
But even if it was found that the contract fell within the authority of a
Manager of a business named as JCI, main issue is Oppenheimer was
still in a doubt entitled to believe on s 129(3) and s 129(1) of the
Corporations Act 2001 (Cth), in view of his conversation with Rhodes
and the provisions of s 128(4) of the Corporations Act 2001 (Cth).
Oppenheimer did not know about Kruger’s jurisdiction in contract.
However, the question arises with suspicion that Kruger did not have
authority? Given his subsequent conversation with Rhodes, it seems
highly likely that Oppenheimer did indeed suspect that something was
wrong. In that circumstance an application of s 128(4) of the
Corporations Act 2001 (Cth), would mean that he was not entitled to rely
on the s 129(3) of the Corporations Act 2001 (Cth), presumption that
Kruger had power and because Kruger indeed did not have power, JCI
Ltd will be released from the contract.
Conclusion
JCI would not be liable for contract with Anglo-American.
Question 2
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