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(1) Understand the usual Scope of An Office

MD usual scope depends on company & circumstances. Can be quite broad. Secretary usual scope includes matters in relation to company administration but sometimes broader: Panorama Developments. - Chairman usual scope includes chairing board meetings & general meetings. Sometimes includes public relations (communication with institutional investors & media) A director acting INDIVIDUALLY has NO usual authority to bind a company (2) Authority (express or implied) actual authority: may be given to the agent verbally or in writing Express (such as board resolution or a service contract) Apparent authority is the authority of an agent as it appears to others . Arises when a persons (or companys) conduct leads a third party (outsider/ contractor) to believe that another person is acting as their agent, when no actual authority has been given. The person or company is estopped from later denying that the person is their agent (or from misleading the outsider/ contractor) Implied: Hely-Hutchison (Director denies liability alleging director has no authorityCourt held: Mr Richards had no express [actual] authority but held that he had authority implied from the conduct of the parties and circumstances of the case. 1) Is given to a person for acts that fall within the usual scope of an authorised position & acts incidental to those authorised (eg when the board of directors appoint a managing director, they impliedly authorize all such things as fall within the usual scope of an MD in such a company & incidental acts) 2) May also arise from a course of prior dealing i.e. a pattern of similar contracts by a person purporting to represent the company with subsequent approval of those contracts by the board. (Hely-Hutchison case.) -

Ostensible or apparent authority Freeman (general law case of ostensible authority) MD has ostensible authority-> Although K had no actual authority to employ the architects, he did have apparent or ostensible authority such as would be within the usual authority of a managing director, and the plaintiffs did not have to inquire whether he was properly appointed. It was sufficient that under the articles there was in fact power to appoint him as such. Crabtree+s 129 (3)-> printer story->MD has no ostensible authority-> Court held: MD had no actual or apparent authority to contract. There was no previous course of dealing to support P having apparent authority and the size of the contract in relation to the respondent required that the appellant deal with the general management of the company. - Apparent authority is the authority of an agent as it appears to others. Arises when a persons (or companys) conduct leads a third party (outsider/ contractor) to believe that another person is acting as their agent, when no actual authority has been given. The person or company is estopped from later denying that the person is their agent (or from misleading the outsider/ contractor). Four conditions for determining whether an officer had ostensible authority (Freeman Case): - that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor; - That such representation was made by a person or persons who had actual authority to manage the business of the company either generally or in respect of those matters to which the contract relates; - That the contractor was induced by such representation to enter into the contract i.e. that he in fact relied on it; and That under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent. Statutory requirements: s 128 entitlement can be make assumptions under s 129: s 129 assumptions that can be made. (3) Sections 125: If contravened constitution and objectives of company , the transaction can still survived (4) S 127 the execution of the company: - That a document is duly executed (without common seal) if it is apparent that it bears the signature of 2 directors (or 1 director and the company secretary) in accordance with s 127(1) or; if only one director/ secretary the signature of such person in accordance with s 127(1); - That a document is duly executed with common seal if it appears that the seal is affixed and witnessed by 2 directors; or if 1 director and the company secretary in accordance with s 127(2) or; if only one director/ secretary that person in accordance with s 127(2); Assumption of s 129: a) That the companys constitution and any provisions of the Corporations Act that are applicable have been complied with; b) That directors and company secretaries who are noted in ASIC records and duty appointed with relevant authority to perform their customary duties;

c)
d) e) f) g)

That a person held out by the company as an officer or agent will be duly appointed with relevant authority to exercise all of the powers customarily exercised by that kind of officer; That an officer or agent will properly perform their duties; That a document is duly executed (without common seal) if it is apparent that it bears the signature of 2 directors (or 1 director and the company secretary) in accordance with s 127(1) or; if only one director/ secretary the signature of such person in accordance with s 127(1); That a document is duly executed with common seal if it appears that the seal is affixed and witnessed by 2 directors; or if 1 director and the company secretary in accordance with s 127(2) or; if only one director/ secretary that person in accordance with s 127(2); That an officer or agent with authority to issue a document can warrant its authenticity.

6) Section 129(6): assume document has been duly executed by companyBrick and Pipe-> transaction was
valid by virtue of s 129(6) even one purported to an secretarySolicitor had not been appointed secretary of the company. Director assured however eventually not happened contract initiator Brick argued the transaction was invalid. However, court held the transaction was valid. G was more than an ordinary director. By virtue of his control of Amsberg, which owned all the shares in B&P, G assumed the role of a MD with the acquiescence of the members of the board of directors who regarded him as the owner of B&P. G had obtained Board approval of transactions to which he had already committed B&P without first seeking authorization of its Board. Thus, G had actual and not just apparent authority to manage the business of the appellant and was able to hold out that F was the secretary of the appellant. The Occidental representative could not be said to have actual knowledge that F had not been appointed. By virtue of [s 129(6)] it could be assumed that the document had been signed by two directors even though one of them purported to be the secretary. General law case freeman + S 129(3) + Crabtree: assume officer or agent is duly appointed and has authority statutory section discuss about ostensible authority --Crabtree-> printer story->MD has no ostensible authority-> Court held: MD had no actual or apparent authority to contract. There was no previous course of dealing to support P having apparent authority and the size of the contract in relation to the respondent required that the appellant deal with the general management of the company

7)

8) 9)

S 129(4): assume officer of company properly perform their duty S 129(5): assume a director and an secretary is duly signed the documents 10) Section 128 Current s 128(4) knew or suspected Brick & Pipe The company is not entitled to assert in proceedings in relation to the dealing that any of the assumptions are incorrect: s 128(1) The s 129 assumptions apply in relation to dealings with another person who has or purports to have directly or indirectly acquired title to property from a company: s 128(2) The s 129 assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings: s 128(3) - A person is NOT entitled to make an assumption under s 129 if at the time of the dealings they knew or suspected that the assumption was incorrect: s 128(4) Brick and Pipe-> transaction was valid by virtue of s 129(6) even one purported to an secretarySolicitor had not been appointed secretary of the company. Director assured however eventually not happened contract initiator Brick argued the transaction was invalid. However, court held the transaction was valid.
Exam Question

A person acting in a dominant way or as a de facto MD over a period of time suggests possible implied actual or apparent authority but more is needed. Implied actual authority requires evidence of conferral of actual authority by the board to the person acting in the role on a de facto basis (eg board resolution actual authority existed in Hely Hutchison, equivocal evidence in Freeman, not present in Crabtree) Consider apparent authority in the alternative. Apply general law principles and statutory provisions unless otherwise stated. To establish apparent authority under general law, must satisfy the four tests in Freeman. Consider how the general law outcomes may be modified by the statutory provisions? Consider s 129 assumptions apply? Do any exceptions apply- s 128(4)

Issue of shares 1. Leila arguments

Calling of meeting: not valid. Only directors have the right to issue shares & GM cannot usurp that power: ss 124, 198

Ultra vires: The share issue was ultra vires as required MD approval. Counter arguments

Notice of meeting not adequate s 249H(1) requires at least 21 days notice.

Calling of meeting: within power & Winsome able to call meeting as majority shareholder: s 249F Notice of meeting: had advance agreement of all shareholders entitled to attend & vote: s 249H(2) Ultra vires: The exercise of a power by the company is not invalid merely because it is contrary to a constitutional provision: s 125 In any event, s 1322 can be applied to validate notice irregularity & resolution no substantial injustice has been, or is likely to be, caused.