Corporate Law Case Study: BNZ Bank, Director's Duties, and Contracts

This case study examines two key issues in corporate law. The first issue revolves around whether BNZ bank can enforce a mortgage on a building. The analysis considers Section 127, Section 128, and Section 129 of the Corporations Act 2001, focusing on the validity of the contract and the assumptions the bank can make. The second issue explores whether Mrs. Jones breached her director's duties in establishing a new corporation and approaching clients. The analysis references Sections 181, 182, and 183 of the Corporations Act 2001, evaluating her actions in terms of good faith, misuse of power, and confidentiality. The case study concludes that the contract is enforceable and that Mrs. Jones breached her director's duties. The assignment includes relevant case law and articles to support the analysis.

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

1CASE STUDY
Issue:
The issue in the case is whether BNZ bank can take over the building as its mortgage.
Rules:
Section 127 of the Corporation Act 2001: this means that the accomplishment of the
record by any corporation may be done without the application of a common seal. But such a
procedure requires the signature of any of both the appointed directors of the corporation or a
corporation secretary and director of the corporation. However, when a corporation is designated
as a independent] proprietorship, then the signature of the independent] director of such
proprietary shall enough for the accomplishment of a record without the common seal. On the
contrary, even if a record is marked with a common seal, accomplishment of such record shall
involve the witness of minimum of two appointed directors of the corporation or a corporation
secretary and a director of the corporation. However, in case of a independent] proprietorship,
the proprietor is the independent director as well as the independent] corporation secretary of the
corporation and hence, under such circumstances, the signature of the proprietor shall suffice the
requirements for the accomplishment of a record with a common seal1. Nevertheless, the
provision of the section does not control or bind the ways in which a record may be executed by
the corporation irrespective of the fact whether or not it has a marking of the common seal.
Section 128 of the Corporation Act 2001: this provision of law states that the person is
entitled to make certain assumptions with respect to any trade or dealings made with the
corporation. However, it is important to affirm that the assumptions are correct and true to their
assertion. The provision of law has also laid down the explanation that the person shall be
1 Boccabella, Dale and Freudenberg, Brett, Who Bears the Burden for Business Losses: To What Extent Are
Liability Issues of Business Structures Taught in Australian Accounting Degrees? (October 2, 2017). Corporation
and Securities Law Journal, Vol. 35(4), p. 235-260, 2017; UNSW Law Research Paper No. 17-72

2CASE STUDY
entitled for assumptions during dealing with another person who has acquired the title of
ownership to the property of the corporation. However, such assumptions should be based on
certain criteria to fulfill the viability of their assertion or else they may be proven wrong for the
advantage of the dealings 2. However, any suspicion at the time of the dealing would render such
assumption as wrong and therefore, such person shall not be given the advantage of assumption
under the provision of law.
Section 129 of the Corporation Act 2001: this provision of law has explicit grounds for
the assumptions stating that the person making the assumption shall infer that the Constitution of
the Corporation has been followed as a set of replaceable rules to the corporation and the
members of the corporation including the director and the corporation secretary. It is further laid
down that the person who have been present for the dealings and have been inferred by the other
party as the person with the acquired title to the property of the corporation, such person should
be a company secretary or the director of the corporation who has been appointed by ASIC and
has the complete authority to exercise the rights and responsibilities of a director or that of a
corporation secretary of that corporation. In case the officer or an agent of the corporation has
initiated the dealings, then it should be inferred that such agent or officer has been appointed by
the corporation for the discharge of similar duties and responsibilities as that of the other officers
of the corporation. The other person should specifically believe that the record presented has
been duly executed in accordance with section 127 of the Act and has been a true copy of
certification from the corporation.
Application:
2 Mitchell, Lawrence E. Progressive corporate law. Routledge, 2019.

3CASE STUDY
In the given scenario, it can be stated that Mr. and Mrs. Jones were operating a Hardware
Store. Mrs. Jones is the director of the corporation. Mr. Jones is the Director and a corporation
secretary of the corporation. She went to bank to borrow money for her new business in Western
Australia with her best friend. The bank officer knew Mr and Mrs. Jones for a long time for
matters of their hardware Shop. Thus, with dealings and business he inferd it is for the Hardware
shop being run by the couple and hence, in all due confidence and good faith, he continued with
the dealings. Mrs. Jones is a designated director of the corporation and because of the marking of
the common seal, it was witnessed by the director which is Mrs. Jones and her new friend who
was designated as the corporation secretary of the corporation. Therefore, applying section 129
of the Corporation Act 2001, it can be said that the BNZ bank made the assumptions in
accordance with the provisions of law and their past dealings about the corporation.
Conclusion:
It can be concluded that the contract between Mrs. Jones and the Bank is enforceable by
law and Bank being a third party, can make assumptions related to the dealings and therefore, the
mortgage can be enforced on the building.
Issue:
The issue in the case is whether Mrs. Jones has breached any director’s duties in
establishing the new corporation and approaching clients.
Rules:

4CASE STUDY
Section 181 of the Corporation Act 2001, states that the director of the corporation should
act in good faith and avoid conflict of interest between that of the corporation and the personal
interest3.
Section 182 of the Corporation Act 2001, states that the director of the corporation should
ensure that the powers are not misused to the advantage of the personal gains or that of the other
corporation4.
Section 183 of the Corporation Act 2001 states that director of the corporation should
ensure that the information of the corporation, and core details of the same are maintained with
secrecy and confidentiality so that competitive firms do not gain interest from the same. In case,
the director is the acting director to a lot of corporation in a group, then in such circumstances, he
is responsible to treat each corporation as an independent one and not use the details of one
corporation for the advantage of the other5.
Application:
In the given scenario, Mrs. Jones being the director to the corporation of the Hardware
stores owed the duties of good faith, and not use the information of the corporation in an
improper way. Similar duties were owed to her when he was named as the director to the new
corporation in the Western Australia. Being the director of the two companies, Mrs. Jones had
the duty to treat each corporation as an independent one and not use one’s information for the
3 ANDREW. KEAY, L. L. B. DIRECTORS'DUTIES. JORDAN Publishing Controled, 2016.
4 Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307
5 Padfield, Stefan J. "The Role of Corporate Personality Theory in Opting Out of Shareholder Wealth
Maximization." Transactions: Tenn. J. Bus. L. 19 (2017): 415.

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profit or the interest of another. But in the given case study, she breached her duty when she used
the largest client of the former corporation which is the Hardware stores with her husband Mr.
Jones and hence, it can be said that Mrs. Jones did not perform her duties as a director in a proper
way and therefore can be held liable for the breach of director’s duties (section 181 and section
183 of the Corporations Act 2001).
Conclusion:
It can be concluded that Mrs. Jones has breached director duties in establishing the new
corporation and approaching clients which is the breach of section 181 and 183 of the
Corporation Act 2001 stating that the director owes the duty of good faith and not to use
corporation’s information in an improper way.

6CASE STUDY
Bibliography:
Articles and Journals:
Boccabella, Dale and Freudenberg, Brett, Who Bears the Burden for Business Losses: To What
Extent Are Liability Issues of Business Structures Taught in Australian Accounting Degrees?
(October 2, 2017). Corporation and Securities Law Journal, Vol. 35(4), p. 235-260, 2017;
UNSW Law Research Paper No. 17-72
Mitchell, Lawrence E. Progressive corporate law. Routledge, 2019.
ANDREW. KEAY, L. L. B. DIRECTORS'DUTIES. JORDAN Publishing Controled, 2016.
Mitchell, Lawrence E. Progressive corporate law. Routledge, 2019.
Padfield, Stefan J. "The Role of Corporate Personality Theory in Opting Out of Shareholder Wealth
Maximization." Transactions: Tenn. J. Bus. L. 19 (2017): 415.
Case Laws:
Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307