Charles Darwin University LAW513 Corporate Law Case Study

This case study, prepared by a student, examines a scenario involving 'Jones Hardware Pty Ltd' and a loan from BNZ Bank. The case explores the legal implications of a mortgage taken out by the company, with Mrs. Jones as a director and Mr. Jones as a director and secretary. The assignment analyzes the enforcement of the mortgage, the application of Section 129 of the Corporations Act, and the relevance of Section 128(4). It further discusses Mrs. Jones's actions in expanding the business, incorporating a new company, and the legal considerations surrounding her decisions, including the roles of directors and company secretaries, and the implications of the loan and mortgage. The student considers the relevant sections of the Corporations Act and provides a detailed analysis of the situation, referencing relevant legal precedents and academic sources to support their conclusions.

Running Head: Corporate Law 0
Corporate Law
(Student Name)

Corporate Law 1
Table of Contents
Question 1..................................................................................................................................2
Enforcement of Mortgage by the BNZ Bank.........................................................................2
Can the assumption of Section 129 of the Corporation Act can be relied on?.......................2
Whether an assumption to the Section 128(4) is applicable or not?......................................3
Conclusion..............................................................................................................................3
Answer 2....................................................................................................................................4
References..................................................................................................................................6

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Question 1
Enforcement of Mortgage by the BNZ Bank
A mortgage is the general transfer of interest in the immovable property. This is specifically
done for securing the money advanced by one party to another. The two parties in the
mortgage are:
1. Mortgagor; and
2. Mortgagee.
A mortgagor is the person whose property is being mortgaged in the transaction, whereas the
mortgagee is the person who is person who is lending the money to the mortgagor (Dao,
Godwin and Ramsay, 2016).
The mortgagee has all the right to enforce the security if the payment is not being done. But it
does require few conditions to be met, which are mentioned herein (Liu, 2015).
As unlike in the other countries the Australian law of mortgages vary from one state to
another. Although the recent amendment has made the law uniform throughout the country.
The introduction of National Consumer Credit Protection Act 2009 has made the law uniform
across the country as already mentioned (Carruthers and Skead, 2017).
Hence the BNZ bank has the right to enforce the property in case the amount is not being
paid in full and get the amount realised except when the mortgagor has the decree of
redemption (Healey and Nicholls, 2016).

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Can the assumption of Section 129 of the Corporation Act can be relied on?
The section 129 of the Corporation Act states various assumptions which a director or a
Secretary is expected to follow while following the duties. The Corporation Act is like the
Constitution for the companies in Australia.
It laid down that if the director or Company Secretary is appointed they shall be duly
appointed and they shall be authorised to perform the duties which they are expected to
perform and they shall work in accordance to those terms and conditions if they would have
worked in some other company (Rohrbeck and Kum, 2018).
They are also expected to perform their duties diligently in accordance with the laws.
If the document is signed by the director or company secretary without the common seal of
the company, then in that case the document will be held valid even without common seal of
the company.
Therefore the assumption made under this Section shall be applied in strict manner. The
purpose of this Section is to ensure that the directors and the Company Secretary shall
perform their duties diligently and in accordance with the law and they shall work as per the
law in the manner other officer’s work (Fisch, 2018).
Even the other party to transaction shall also assume that the signature on the document is not
the forged one and the common seal further verifies the document (Pollman, 2016).
Whether an assumption to the Section 128(4) is applicable or not?
The Section 128(4) states that “A person is not entitled to make assumption in the Section
129 if at the time of the dealings they knew or suspected that the assumption was incorrect”.
The simple meaning of the above provision can be interpreted in the following manner that if

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the person knew that at the time of dealing with the other party in any transactions the
situation arises which he/she assumed it be suspicious or incorrect, the person shall not
assume (Goshen and Squire, 2017).
Conclusion
In the case Ronald John & Anor vs Kingsway Group limited & Bowring Mortgage
Investments Limited & Ors – stated that the mortgagee to carefully consider the terms of the
mortgage deed.
In this case the appellant was the director of B&B Holding Pty Limited. B&B Pty Limited is
in a business of Real estate operating in New South Wales. The company obtained 3
different-different loans from different investment companies. In return three different
properties were charged which was owned by the company itself. Appellant he gave personal
guarantee to each financier.
Later on, the company defaulted on the payment. Therefore the first mortgagee in order to
recover the sum due sold the first property. In order to receive the full due amount mortgagee
took the enforcement action and distributed the surplus to second and third mortgagee.
This was challenged in the Lower Court by the appellant as they stated that the surplus should
have been given to them so they could have repaid the sum due to first mortgagee. Lower
court dismissed the appeal. It was further challenged in the High Court which pronounced in
the favour of appellant regarding the surplus (Dorff, 2017).
Answer 2
Mrs. Jones along with her friend incorporated a company in order to expand the business of
the company. She was already running one more company along with her husband with the

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Company named Jones Hardware Pty Ltd. They deal in the business of Hardware (Knapp,
Crystal and Prince, 2019). In order to expand the business in other part of Australia,
specifically Western Australia where they haven’t been able to reach so far. In order to cover
Western Australia she incorporated the company. She becomes the director and shareholder
of the newly incorporated company. In the Company Jones Hardware Pty Ltd, Mrs Jones was
the Company Secretary whereas her husband was the Director (Goldberger, 2018).
In the newly incorporated company, Mrs Jones makes her friend as the Company Secretary of
the Company. It is not clarified that her friend is the Company Secretary or not. As Company
Secretary can be only that person who has cleared certain set of exams and has the
membership number. Whereas for being a director, no such qualification is being prescribed.
Any person who incorporates the company can act as the director the company. Also he/she
has the power to make some other person as the director of the company (Armour et al.,
2017).
For expansion she took the loan of $300,000 from the BNZ bank. The bank manager being
the close relative of Mrs. Jones grants them loan on mortgage. As a security for the mortgage
they mortgaged the property where their earlier company was carried on.
She being the director of the company signed the mortgage paper and affixed the company
seals on it and her friend signs on the mortgage paper as secretary (Lamba and Ramsay,
2015).
Mrs. Jones in order to expand her business incorporated new company and started the
company in Western Australia to cover the uncovered region.
It’s a very normal practise to open up another company to expand the business and Mrs.
Jones did the same along with her friend. It is immaterial that she didn’t start her business

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with her husband and she went ahead with her friend. It’s the wish of Mrs. Jones to
incorporate the company with anyone. Also it’s her personal wish to leave her husband and
get along with her friend to establish the company at other place (McKendrick and Liu,
2015).
It is also assumed that she has followed all the laws while incorporating the company as
mentioned under the Corporation Act. Also the loan taken is taken on behalf of the company
which is also legal. As and when the company starts earning profits the debt will be repaid as
per the terms and conditions of the mortgage.
Also taking company to the place where it doesn’t have any physical presence will help the
company earn more and more client. It is also expected that the order book of the company
will grow substantially as new geographical client will be added. Having more than one
branch also signifies the robust position of the company to earn more clients (Welmans and
Naughton, 2019).
Hence it can be conclude that Mrs Jones has followed all the relevant laws and statutes in
order to incorporate her company and there seems to be no such breach of duty by her in her
personal capacity.
Also it’s a nice way of reaching out to the clients in order to grow the business of the
company and to give clients best service. It is often said “Consumer is the king” (Skeel,
2016).

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References
Armour, J., Hansmann, H., Kraakman, R. and Pargendler, M. (2017) Foundations of
Corporate Law. FGV Direito SP Research Paper Series, (147).
Carruthers, P. and Skead, N. (2017) A law for modern times: the Electronic Conveyancing
National Law, forged mortgages and immediate indefeasibility. Property Law Review, 7(1),
pp.4-23.
Dao, A., Godwin, A. and Ramsay, I. (2016) From enforcement to prevention: international
cooperation and financial benchmark reform. Law and Financial Markets Review, 10(2),
pp.83-101.
Dorff, M.B. (2017) Why Public Benefit Corporations. Del. J. Corp. L., 42, p.77.
Fisch, J.E. (2018) Governance by contract: The implications for corporate bylaws. Calif. L.
Rev., 106, p.373.
Goldberger, J. (2018) Assessment of damages for breach of contract. Commercial Law
Quarterly: The Journal of the Commercial Law Association of Australia, 32(3), p.12.
Goshen, Z. and Squire, R. (2017) Principal Costs: A New Theory for Corporate Law and
Governance. Colum. L. Rev., 117, p.767.
Healey, D. and Nicholls, R. (2016) Should Stability Reign? The Consumer Downside of
Foregone Competition in Retail Banking Markets. Banking & Finance Law Review, 32(1),
p.69.
Knapp, C.L., Crystal, N.M. and Prince, H.G. (2019) Problems in Contract Law: cases and
materials. New York: Aspen Publishers.

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Lamba, A.S. and Ramsay, I. (2015) Commercial Litigation in Australia: An Empirical
Study. Journal of Civil Litigation and Practice, 4(1), pp.22-29.
Liu, H. (2015) Constructing the GFC: Australian banking leaders during the financial
‘crisis’. Leadership, 11(4), pp.424-450.
McKendrick, E. and Liu, Q. (2015) Contract Law: Australian Edition. Australia: Macmillan
International Higher Education.
Pollman, E. (2016) Constitutionalizing Corporate Law. Vand. L. Rev., 69, p.639.
Rohrbeck, R. and Kum, M.E. (2018) Corporate foresight and its impact on firm performance:
A longitudinal analysis. Technological Forecasting and Social Change, 129, pp.105-116.
Skeel, D.A. (2016) The Bylaw Puzzle in Delaware Corporate Law. Business Lawyer, 72, p.1.
Welmans, L. and Naughton, J. (2019) The Interest Based Penalty Tests in Paciocco and
Cavendish/Parkingeye and the Law of Penalties and Damages in Australia and the United
Kingdom. UW Austl. L. Rev., 44, p.157.