company law

BFA726 Corporate Law and Regulation Assignment 1

The idea of this assignment is to use Agency Law, corporation Act and the company’s relation with outsiders to analyze a business case and give a conclusion.

In this case, the directors of Three Tunas Ltd bought 10,000 shares from BHP Billiton Ltd. After that purchase was finalized, BHP Billiton Ltd sent Three Tunas Ltd a bank form to transfer their dividends into the bank account of Three Tunas Ltd. This banking form should be signed in the following by either two directors or by a director and the company’s secretary.

……………….....Signature of Directors ………….............Signature Director/Secretary [strike out whichever is inapplicable] Todor, the Three Tunas Ltd’s secretary, wrote down his own bank account’s details and asked his wife by forging the signature of directors in the banking form. Afterwards, Todor posted the banking form to BHP Billiton Ltd. BHP Billiton put the dividends crediting to Todor’s personal account. Soon after, Todor resigned his job and there was no one knows that where he had gone. After 18 months, Three Tunas Ltd’s internal auditors found that BHP Billiton’s dividends had not deposited into Aardvark Ltd’s bank account and reported this matter to the company’s managing director. Then he found Todor did this. Afterward, BHP Billiton corrected the right bank account and agreed to deposit the dividends into this account in the future. However, the BHP Billiton refused to compensate for Three Tunas’ loss.

Parties:

The plaintiffs: Three Tunas Ltd, who brought 10,000, shares in BHP Billiton Ltd on the company's behalf.

The Defendants: BHP Billiton Ltd, who sell shares to Three Tunas Ltd.

Issues:

1. What rights does Three Tunas Ltd have against BHP Billiton?

Why does Three Tunas Ltd put BHP Billiton Ltd in the position of first defendant in place of Todor and his wife?

2. Can Three Tunas Ltd gets the refund on the basic they did not sign the bank account form and it is not legally bound?

3. Were Todor and his wife acting with any authority when they signed this document?

4. Should BHP Billiton Ltd have suspected that signatures forged and they were provided the wrong bank account?

Rules

1. Agency Law and corporation Act section 126

(1)[Power to contract] A company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company’s express or implied authority and on behalf of the company. (Company is liable for the actions of its employees)

2. S 127 Execution of documents (including deeds) by the company itself

(1)[Documents executed without seal] A company may execute a document without

using a common seal if the document is signed by:

(a) 2 directors of the company; or

(b) A director and a company secretary of the company; or

(c) For a proprietary company that has a sole director who is also the sole company

secretary—that director.

[Document duly executed without seal] A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1).

3. Corporation Act S 128 and 129 represent a statutory form of the ―indoor management

rule‖ found in Turquand’s case (Royal British Bank v Turquand)

•Northside Developments Pty Ltd v Registrar-General.

Eg: The case in which the company argued successfully that outsider can not rely upon Turquand’s case.

4. S 128 Limitations to the statutory assumptions

(4)[Assumption not valid if known to be incorrect] A person is not entitled to make

assumption in section 129 if at the time of the dealings they know or suspected that the assumption was incorrect. (Company as BHP Billiton when they received the document they must have noticed and suspected an irregularity)

S 129 Assumptions that can be made under section 128