Discuss about the Coopers Brewery Limited and KTS Limited.
It was ruled by the court that in order to decipher and state the appropriate powers of a company, it is necessary that the its constitution is understood and examined first, as presented in the Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2006) 59 ACSR 444 case. The decision of the court was based on the section 125 of the Company’s Act 2001 and to see whether there are any foreign scopes that bind the company’s constitution.
The company’s legal capabilities that help the organization and guide it with its transactional duties and dealings are mentioned in the Section 124 of Company’s Act 2001. As a separate legal entity, the law empowers the company to get into transactions on its own.
It is mentioned in the Section 125 of Company’s Act 2001 that even if the company’s constitution doesn’t mention any clause that supports transaction, the company can, by all rights get itself to engage in any valid transactions whatsoever.
It was stated by the judges that any outside entity who is willing to engage in any activity with the company can hold the presumption that the company’s constitution supports transactions and has the authority to it, as stated in the Royal British v Bank v Turquand(1856)119 ER 886 case.
The Section 126 of the act states that any entity who works in behalf of the organization has the right to commit to and deal with any necessary transactions that may prevail, even if the company’s insignia or its official seal are not used in the said event.
It was seen and judged In the Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 case, that of in any case the supposed presumptions held by a person are incorrect and they are aware of that fact, then the assumption cannot be used while the transactions are undergone by the authorities.
It is in the Section 128 that a third parson entity has the right to hold presumptions about the company and its rules. Another section; that is the Section 129 makes it clear that when a third person is to assume something about the organisation; the organisation in no way can claim that the said assumption is invalid. A person can also provide assumptions while transacting with a different entity who claims to have claimed the property or the name of the company either directly from the organization, or indirectly. Even is such a case, the company or any other entity cannot lodge a case claiming that the certain assumption is invalid, this goes to that the act stays strong even if the certain entity has engaged itself to fraud or has accomplished a certain transaction with fraudulent tendencies., the assumptions made in those cases will be valid as well. But, as discussed above, if the entity was aware or had had suspicions that the assumptions are wrong; they can never rely on both the sections stated.
It was ruled by the court that any person, after transacting or dealing with an organisation, is empowered to hold more than a single assumption about the said company in the Brick and Pipe Industries Ltd v Occidental Life Nominees (1992) 10 ACLC case. The same rules were applied in the Advance Bank Australia v Fleetwood Star Pty Ltd (1992) 10 ACLC 703 case.
The Section 129 also implores upon the fact that the said person has the right to assume that during a said transaction, the company has rightfully applied all the rules and regulations, replaceable or not. Not only that, the person can assume via any information given to it by ASIC that the entity transacting with the person and is shown in public has the position of a director or an officer and can perform actions of authority and hold power. It can also be assumed by that person that the company officials are doing their work properly and lawfully.
The said entity can also assume that all the documentations are properly treated with by the company if a certain document is apprehended and not signed as in the Section 127(1). Same can be said for the assumptions of a person when assuming the entity who signed the document is a director of the Organisation.
John and Mary, who are the stockowners and members of the directorial board of the organisation named Kakadu Tourism Services Pty Ltd (KTS) are said to have been married. They were mentioned to have been occupying a domicile possessed by the said tourism company, until John was forced to move out and only Mary was left as the sole occupant of the property, resulting from their marital split. It is clearly mentioned that Mary had played no significant role in the working of the organization whatsoever.
A car finance company had provided a loan for the purchase of a $80000 sports car by John and set conditions that the mortgage will be extracted on the property of the office that is in-fact, owned by the tourism company, KTS.
Respecting the conditions provided by the Section 125 of the Company’s Act, the act was said to be legal, even though said company, KTS is supposed to be a tourism company and not a leas provider. Hence, the following transactions are not being held illegal.
It was clearly stated in the Section 126 that any entity who is in a position of power or represents a company in a way or the other is empowered to take control or start any new transactions in the name of the Organization, no matter what they are. Since, John is supposed to be the directorial board of KTS, he has the right to perform transactions in the name of the organization, and hence the purchase of the car cannot be denied or called illegal by KTS limited.
Though the said care is claimed to have been the property of John, him being the director gives him the ability to issue transactions for the company, hence the lease company has is empowered to extract its mortgage from KTS’s office and assets.
It was further seen that $200000 were borrowed by John from the Easy Loan Bank in order to mortgage the domicile which was occupied by them without letting his wife know about this particular deal. It is clear that John is a director and stated that his biological son, Michael is secretary of KTS ltd., hence, as stated in the section 127, of the company’s act, any transactions signed and witnessed by any company official or its directorial board is finalized legally and can formulate any documents that are needed.
It was mentioned by him to the manager that his wife Mary had given her resignation from her post as the secretary and was taken over by his son Michael. This was done without the consent of the directorial board of the KTS Ltd. As given in the said Constitution.
It has been mentioned in the Section 129 of the act that a third person engaging themselves with a transaction can think that the following transactions are done under the approval of the company’s replaceable rules and regulations and are done in all legality. It was also clearly stated in the Section 127(1) that it can be assumed by the third person that the said documents provided to them are signed and approved by officials or the directorial board of the company. Hence, it can be assumed by the Bank that all the actions taken by John were done in all legality and John being a director had approved of all of them. It is also stated that if a said entity claims to be a member an official board of the company, the other party can unknowingly assume it’s true.
It has been clearly stated in the Section 129 (6) that if a person is aware of the fact that their assumptions may be wrong, then the section 129 is invalid. In this case, the Bank made no such inquiries with the ASIC to confirm the fact of Mary’s resignation and Michael’s replacing her and neither were any documents available, neither did the Bank make any enquiries with the directorial board or other officials of the company about the legality of the said transactions. Hence, it can be said that the financial institution has no right to assume and section 129 is invalid in their case.
The car lease deal that was made with KTS by John is legal and is binding. The bank though, cannot assume, as per the Section 129 of the CA.
Advance Bank Australia v Fleetwood Star Pty Ltd (1992) 10 ACLC 703.
Brick and Pipe Industries Ltd v Occidental Life Nominees (1992) 10 ACLC
Corporation Act 2001 (Cth)
Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2006) 59 ACSR 444
Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146
Royal British v Bank v Turquand(1856)119 ER 886