Case Study based on Business Law in Australia. These PPTs encompass of Rules and applicable principles of law, Application of these rules which are applied in Prudent Bank Ltd and Free hills Antiques Pty Ltd.
2. Freehills Antiques Pty Ltd. comprises of Freddy and Fiona
Freehill who are the officers and shareholders.
Prudent Bank Ltd is the banker of Freehills and the
company maintains credit facility with them.
Though Freddy is the managing director, yet all the
decisions in the business are made by Fiona.
The constitution of the company provides that in case of a
decision concerning a financial transaction above
$500,000, it must be executed under the common seal.
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3. Due to an argument Fiona leaves for a period of two
months and goes to London.
Freedy meanwhile, comes to know of an Antique fair and
with an intention to purchase property from the fair, asks
for a loan of $1.25 million from Prudent.
He makes his daughter Felicity to attend office and sign
the documents and represents that Felicity was the new
director of Freehills.
Felicity also approaches under her new capacity to take a
loan in order to lease a new Ferrari for her.
Subsequently, Freehills makes a default in payment.
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4. Whether Felicity can be said to be a company
secretary?
Whether the loan granted by Prudent is
enforceable?
Whether the lease agreement and the loan can
be considered to be valid agreements?
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5. Memorandum of Association of every company should be
maintained with the Registrar of companies.
The Doctrine of Constructive Notice.
Section 125 of the Corporations Act that deals with indoor
management.
Individuals trading with companies are permitted to
believe that all the measures that are necessary in the
dealing have been followed and observed.
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6. Relevance of the Indoor Management rule in
Turquand’s case (Royal British Bank v Turquand)
Deed of settlement is equivalent to and parallel
to the Memorandum and Articles.
The case of National Australia Bank Ltd v
Sparrow Green Pty Ltd (1999).
Establishment of the legal rule that companies
can act on the position of their agents and shall
be liable.
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7. The case of Albert Gardens (Manly) Ltd v Mercantile
Credits Ltd.
The case of Northside Developments Pty Ltd v Registrar-
General.
The matter of Mahony v East Holyford Mining Co (1875) LR
7 HL 869.
Generally, changes taking place in the internal affairs of
the company are not a concern of the bank.
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8. Both the banker and the Ferrari dealer have entered into the
contract on good faith and hence there is no justification as to
why the contracts should not be enforced by them.
The guiltless shareholders and the creditors are at stake and the
loss has to be borne by them.
Prudent had absolutely no doubts as to the uncertainty that was
lying on its part and hence it is justified in going forward with the
contract.
Felicity was representing herself as the company secretary at
Freehills and she signed the lease document based on that
capacity.
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9. Both the banker and the car dealer are under
protection by the doctrine of indoor
management.
All the documents were verified by both the
banker and the Dealer and hence there is no
fault on their part.
Both Prudent bank and Ferrari Dealer shall be
able to enforce their respective contracts in
order to recover their loans and executing the
lease.
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10. If an officer of the company surpasses his powers which
are conferred on him by the Articles, he shall be held
liable.
Non-compliance with in-house processes does not invite
any liability on the creditors.
The outsiders and the creditors have full rights to believe
that all in-house processes have been complies to without
any cross checking.
Thus, both the banker and the Ferrari dealer can enforce
the contracts.
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11. Krawitz A., (2002), Protecting Outsiders to Corporate
Contracts in Australia,Murdoch University Electronic Journal
of Law, Volume 9, Number 3.
Chapple L. & Lipton P., (2002), Corporate authority and
dealing with officers and agents, Published by Centre for
Corporate Law and Securities Regulation and CCH Australia
Limited, Melbourne.
Morrisson D., The continued role of the common law indoor
management rule due inquiry exception, Available From
website: https://lr.law.qut.edu.au/article/download/409/398
Vijaychandranan A., (2008), The indoor management rule,
Available From website
http://vijayhighcourt1.blogspot.com/2008/10/indoor-
management-rule.html.
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12. Sealy L. & Worthington S., (2007), Cases and materials in
company law, Oxford University Press, pg. 137-138.
Cain T., The Rule in british bank v turquand in 1989,e
publication .edu.au, Vol. 1, Issue 2, Article 8
Hinchy R. & McDermott P., Corporate Liabilty, Available From
website
wps.pearsoned.com.au/wps/media/objects/2604/2667009/.../
Chapter4.do.
Tomasic R. , Bottomley S. & McQueen R., (2002), Corporation
Law in Australia, Federation Press, Second Edition, Pg. 234.
Law Teacher, (2015), Contracts made by agents, Available From
website: http://www.lawteacher.net/free-law-essays/contract-
law/contract-made-by-agents.php
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