Assignment 2: Case Study on Corporate Law - BNZ Bank and Mrs. Jones

This case study analyzes a scenario involving BNZ Bank and Mrs. Jones, a director of Jones Hardware Pty Ltd. The case explores whether BNZ Bank is entitled to enforce a mortgage on the company's building based on assumptions made by the bank manager under the Corporations Act 2001. The analysis delves into the application of sections 127, 128, and 129 regarding assumptions in dealings with companies. Furthermore, the case investigates whether Mrs. Jones breached her director's duties by using company contacts for her personal gain. The study examines her actions in relation to sections 181, 182, 183, and 184 of the Act, which address directors' fiduciary duties, misuse of powers, and maintenance of company secrecy. The conclusion determines whether the bank's assumptions were justified and if Mrs. Jones's actions constituted a breach of her directorial responsibilities.

Running Head: CASE STUDY
CASE STUDY
Name of the Student
Name of the University
Author’s Note

1CASE STUDY
Issue
The concern in the given case is whether BNZ Bank is entitled for the enforcement of the
mortgage of the property of the building.
Rules
The Corporation Act 2001 explains the provisions with respect to the assumptions made
during dealings with the parties including a company or the person acquiring the title to such
deal of the company. Section 127 of the Act says about the provision for the implementation of
the document with and without the seal. In this scenario, it has been stated that a company can
implement documents without the common seal by the way of signatories of one director and
one company secretary appointed in that company. The signatories of two directors shall also
suffice the requisites for the implementation of such document. In case of singly proprietary, the
director and the company secretary are the one person and hence one signature of the singly
director and the company secretary shall be enough to meet the pointers for the implementation
of the document. On the contrary, dealing with the documents with the common seal, the
requisites lie with the witnesses of such seal. In this scenario, the witness would essentially
include two directors of the company. In certain circumstances, it may also include the witness
of one director and one company secretary of the company. In circumstances where, the director
and the company secretary is the same for the company which is the case of sole proprietary, the
signature of such single director and the company secretary shall form the witness to the
implementation of the documents. Nevertheless, the provision does not marginalize the
numerous mannerisms in which a document can be implemented by the company. A company’s
constitution guides the provisions for the implementation of the document according to which

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the document can be implemented even by way of passing resolution by the directors in a Board
Meeting.
Section 128 of the Act states about the entitlement for the assumption making. This
means that section 128 primarily lays down the requirements as to the assumptions that can be
made in accordance with section 129 of the Act. There are four main provisions for this section
to be enforced. The first provision states that in case of dealing between a person and company,
the assumptions can be made about the company and it’s related validity. The second provision
states that in case of dealing between a person and other person who has acquired the title to
manage the properties of the company, the assumptions can be made by the person with respect
to such person and their viability of appointment. Thirdly, in case of dealing with the agents or
the officers of company, and such agents or officers are acting fraudulently or with forged
papers, assumptions can be made by the other party. However, the fourth provision is a
conditional provision for all the other three provisions stating that the assumptions can be made
as per section 128(1), (2), (3), but such assumptions are subject to the validity of the correctness
of the assumptions. It means that if the assumption is incorrect, it shall not be enforceable.
However, the provision also states that at the time of dealing, if the assumptions we’re o
suspicious nature, or the person or party knew that the assumption is incorrect then such
assumption shall not be admissible.
Section 129 of the Act states that in accordance with the flexibility of the applicability of
the Constitution of the company, the assumption can be made with respect to the directors that
they have been appointed by the company members to perform the rights and duties as the
director to the company. Assumption should always be in positive nature stating that it should be
assumed that the officers and the agents of the company are personal their duties as bestowed

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upon them owing to their role in the company as it's officer or agent. It should also be assumed
that the agents or officers of the company are duly appointed by the company and they perform
their duties in accordance with their responsibilities accorded in their employment. Further in
case of documents, the assumptions should be made that such document has been implemented
in the company irrespective of its common seal owing to provision of section 127.
The same has been explained in Australia and New Zealand Banking Group Limited vs.
Adventure Quest PaintBall-Skirmish Pty Limited [2016] NSWSC 188. It has been explained by
Robertson and Wang 2015 that the assumptions hold a very important position in determining
corporate diplomacy which means assumptions. These assumptions form immunity to the other
party making the dealing.
Application
In the given scenario, Mrs. Jones went to the bank for her documentation and the same
was assumed by the bank officer that the document has been implemented by the company.
Secondly, the bank officer knew her for her working with her husband and his company. Hence,
his assumptions about her being acting in the capacity if the director of the company is justified.
Lastly, she did not disclose the fact that the loan was taken for her new company which she's
establishing in Western Australia wit her friend and therefore, the bank manager assumed that
the loan money is for her company with her husband. Thus, the assumptions were justified.
Conclusion
It can be concluded that the BNZ Bank was entitled for the mortgage of properties of the
company building on the ground of assumptions made by the bank manager as per the
applicability of section 127, 128 and129 of the Corporation Act 2001.

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Issue:
The issue in the case is whether the act of Mrs. Jones has amounted to the breach of the
duty of the directors.
Rules:
The Corporation Act 2001 lays down the provision for the duty of the directors.
According to Pearce 2013 it has been explained that the directors owe fiduciary duties to the
company and hence, owing to their position of being the managers to such company, they owe
duties to them which cannot be conflicted with their personal objectives. According to section
181 of the Act, it has been laid that the directors are bound to act in good faith towards the
company. Such good faith also extends its liability upon the directors to maintain the surety of
the avoiding of the conflict of interest between the company and the personal self (Bell Group
Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 225 FLR 1). According to Bednall and
Hanrahan 2013, it has been explained that the directors foremost duty towards the company is to
maintain good faith towards the interests of the company. Furthermore, Section 182 lays down
that the company directors are restricted from using the powers of their directorship in an
improper way. This means that the directors are not allowed to misuse their powers for the
benefit of the other company or even the personal gains by benefitting a company owned by that
director (Australian Securities & Investments Commission v Somerville (2009) 259 ALR 574).
Bednall and Ngomba 2013, states that it is the secrecy which keeps the company safe and live
amidst the competition. Section 183 of the Act explains that the directors of the company should
maintain secrecy with the data of the company affairs. This means that the directors are restricted
to share the details and information of the company and its internal matters related to profits,

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strategies, projects and so on, to another people or even misusing such known data for the benefit
of other company or any company which is owned by such director (Australian Securities &
Investments Commission v Adler (2002) 168 FLR 253). According to Gummow 2013, it has
been stated that the information of the company should be dealt with utmost care and good faith.
However, if the director owes his duty of directorship to more than one company, then such
director should consider each company as a separate one and work in utmost good faith in
accordance of each company. Sector 184 lays down the remedies for the company in case of the
breach of duty of the directors.
Application:
In the given scenario, it can be noticed that Mrs. Jones is a Director to a company with
her husband. She further wants to open and establish a new company with her friend. Therefore,
in order to achieve the latter, Mrs. Jones used the contacts of the company in the bank. However,
the liability for the duty of a director arose when she used the largest client of her husband’s
company in which she herself is also one of the directors and hence, it can be said that she
breached the duty of not misusing the information of the company which the director receives as
a part of the manager of the company.
Conclusion:
It can be concluded that the act of Mrs. Jones has amounted to the breach of the directors
duty towards the company.

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REFERENCES:
Bednall T and Hanrahan P, “Officers’ liability for mandatory corporate disclosure: Two paths,
two destinations?” (2013) 31 C&SLJ 474.
Bednall T and Ngomba V, “The High Court and the c-suite: Implications of Shafron for
company executives below board level” (2013) 31 C&SLJ 6.
Gummow W, “The equitable duties of company directors” (2013) 87 ALJ 753.
Pearce M, “Company directors as ‘super-fiduciaries’” (2013) 87 ALJ 464.
Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 225 FLR 1
Australian Securities & Investments Commission v Adler (2002) 168 FLR 253
Australian Securities & Investments Commission v Somerville (2009) 259 ALR 574
Robertson, A; & Wang, J; 2015, The Assumptions of Responsibility. The Law ofMisstatements,
50.
Australia and New Zealand Banking Group Limited vs. Adventure Quest Paintball-Skirmish Pty
Limited [2016] NSWSC 188.