LAW513 Assignment 2: Problem on Execution of Corporation Documents

This assignment analyzes the execution of corporation documents under the Corporations Act 2001, focusing on a case study involving 'Two for Tea Pty Ltd' and Eastpac Bank. It addresses the requirements for valid document execution as per Section 127, and explores the application of Section 129, including the indoor management rule and assumptions in favor of third parties. The assignment examines whether a mortgage contract is enforceable against the company, considering issues of authority, forgery, and the exception to assumptions under Section 128(4). The analysis incorporates relevant case law, such as *Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd*, *Crabtree-Vickers Pty Ltd v Australia Direct Mail Advertising & Addressing Co Pty Ltd*, and *Story v Advance bank of Australia Ltd*, to support legal arguments and conclusions regarding the bank's rights and potential exceptions to those rights. The assignment concludes that the assumptions under Section 129 are available to Eastpec, enabling the enforcement of the mortgage contract, but acknowledges an exception under s 128(4) of the Corporations Act.

Running head: Execution of Corporation’s Documents 1
Execution of Corporation’s Documents
Name of the Student
Name of the Institution
Name of the Instructor

Execution of Corporation’s Documents 2
Question 1
Section 127 of the Corporations Act 2001 stipulates the mode of execution of
corporation documents. A company with no seal, the company documents are executed by at
least two directors of the company or the documents can be executed by the company
secretary and a director of the company. The documents can also be executed by a single
director acting as a single director and company secretary for sole corporations (Lipton,
2012).
In Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd [2004] FCA 135 the
company’s document was not sealed but was signed by two directors. The court held the
document to be properly executed in accordance with s 127. Company can also execute its
documents through sealing, however, this has to be witnessed by at least two officer of the
corporation being directors and company secretary. The seal represents the corporation’s
signature. Northside Developments Pty Ltd v Registrar-General (1990) 8 ACLC 611
espoused on the importance of company seal. It makes the document the company’s.
Question 2
Issue
Is the mortgage contract enforceable against Two for Tea Pty Ltd.
Rule
A corporation has the power attributed to natural person including to enter contracts.
The Corporations Act provides assumptions in favour of third parties dealing with the
company. Forgery or fraudulent actions of a corporation’s officer do not limit the
assumptions, s 128. Section 129 (3) provides assumptions as to appointment and authorities
officers of a corporation (Bottomley et al, 2017). However, the company is not bound unless
it had made a representation as appointment and authority of its officers (Latimer, 2011).

Execution of Corporation’s Documents 3
In Crabtree-Vickers Pty Ltd v Australia Direct Mail Advertising & Addressing Co Pty
Ltd (1975) 133 CLR 72 an officer of the corporation without authority signed a contract to
bind the company. The company was not liable since it had not any representation about that
officer. Section 129 (2) also provides assumption as to appointment and authority of
corporation officers while. Section 129 (1) provides for the indoor management rule. The
assumption is available to a person who innocently contracts with a corporation. Assumption
as to due performance of duties and obligations by officers of a corporation is also available
to contractor under s 129 (4) while s 129 (7) provides assumption as to guarantee of
authenticity of documents by the corporation officers producing the documents. Subsections
129 (5) and (6) provides for assumptions as to execution.
Application
The mortgage was duly signed, per se, as per s 127 and thus enforceable. The fact that
there were forgeries does not eliminate the bank’s right to assumptions under s 129. Mrs
Quibble had been represented as officer of the corporation. The assumptions under ss 129 (3),
129 (50 and 129 (6) are therefore available to the bank.
Conclusion
The Assumptions under s 129 of the Corporations Act are available to Eastpec. It can
also enforce the mortgage contract.
Question 3
Issue
Is there an exception to the assumptions as per s 128(4).
Rule
The Corporations Act under Section 128 (4) removes the benefit of the assumptions
under s 129 to third parties where they knew or suspected the assumption to be wrong. This
might be brought about by the person’s knowledge of internal regularity or non-compliance

Execution of Corporation’s Documents 4
with the corporation’s constitution (Tomasic, Bottomley and McQueen, 2002). The
knowledge must be actual and not constructive. Story v Advance bank of Australia Ltd (1993)
11 ACLC 629 the husband forged wife’s signature for a personal mortgage secured by the
company’s property. The assumptions under s 129 were available to the bank despite the
signature on the documents being forged. The forgery did not vitiate the validity and
enforceability of the document duly executed on the face of it.
In Sunburst Properties Pty Ltd (in Liq) v Agwater Pty Ltd [2005] SASC 335 it was
stated that the test is subjective. The third must have actual knowledge or actually suspected
the dealing (Bottomley et al, 2017). In Caratti v Mammoth Investments Pty ltd (2016) 50
WAR 84 a lease with a forged signature was held to be valid. The entitlement is not lost
merely because the person ought to be suspicious. Soyfer & Another v Earlmaze and Others
[2000] NSWSC 1068 also involved a forged document and were held to be valid. The
knowledge and suspicion must be actual.
Application
The bank’s manager thought Mrs Quibbles request and purpose for loan was odd but
did not make any inquiry. This is actual suspicion that Mrs Quibbles lacked authority to enter
such an arrangement. In Caratti, and Soyfer it was stated that the suspicion must be actual
and s 128 (4) also expects the third party to must have had actual suspicion.
Conclusion
There is an exception to the assumptions by way of s 128(4) of the Corporations Act.

Execution of Corporation’s Documents 5
References
Books
Bottomley, S., Hall, K., Spender, P. and Nosworthy, B. Contemporary Australian Corporate
Law. Cambridge University Press, 2017
Latimer, P. Australian Business Law 2012. CCH Australia Limited, 2011
Lipton, P. Understanding Company Law. Thompson Reuters, 2012
Tomasic, R., Bottomley, S. and McQueen, R. Corporations Law in Australia. Federation
Press, 2002.
Legislation
Corporations Act 2001 (Cth)
Cases
Caratti v Mammoth Investments Pty ltd (2016) 50 WAR 84
Crabtree-Vickers Pty Ltd v Australia Direct Mail Advertising & Addressing Co Pty Ltd
(1975) 133 CLR 72
Hewlett-Packard Australia Pty Ltd v Exceed Pty Ltd [2004] FCA 135
Northside Developments Pty Ltd v Registrar-General (1990) 8 ACLC 611
Royal British Bank v Turquand (1856) 6 E & B 327
Soyfer & Another v Earlmaze and Others [2000] NSWSC 1068
Story v Advance bank of Australia Ltd (1993) 11 ACLC 629
Sunburst Properties Pty Ltd (in Liq) v Agwater Pty Ltd [2005] SASC 335