Corporate Law and Assignment

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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:#p#分頁(yè)標(biāo)題#e#
(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 http://m.elviscollections.com/Thesis_Writing/Law/ 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
Application:
1. There is a legally enforceable contract between Three Tunas Ltd and BHP Billiton Ltd according to which BHP Billiton Ltd have to transfer dividends to Three Tunas Ltd.
•Three Tunas Ltd did not receive the dividends.
•According to s 127(1) execution without common seal: A company may also execute a document without using a common seal if two directors or a director and a company secretary sign the document. However, in that case, the form was never signed by any of the directors.
On the other hand, based on this case, Even though todor signed the form he was acting with apparent authority, and his acting with apparent authority are binds with the company and company is liable for the actions of its employees, The former employee, Todor, it is the bond between with Three tunas' business and is of no concern or relation to BHP. In this case, BHP has a legally contract with Three tunas. They should credited the dividends to Three Tunas Ltd, If Three Tunas Ltd want seeks recovery of damages, they should put BHP Billiton Ltd in the position of first defendant in place of Todor and his wife
2. The company makes a contract by the person who has the authority to do so. Therefore, if someone who has no authority to sign the contract, it will not bind the company, will not make them liable. Todor was not and could not be authorized to give his own bank details in the form. However, he was the company secretary and properly appointed to this position by the company. He was acting as apparent authority. There is an issue about contractual obligations of the companies, this issue has to be considered, Todor’s wife who signed this form instead of director did not have any authority to do so.#p#分頁(yè)標(biāo)題#e#
But based on 126(1)[power to contract] A company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting as the company’s expression or implied authority to be on behalf of the company.  .
3. Why the Turquand’s case is not applicable? That was indeed the irregularity internal to the company. There are two of directors who authenticated the company’s common seal. Moreover, the rule in Turquand’s case does not apply of the person dealing with a company has actual knowledge of an irregularity or is put on inquiry in the circumstances and fails to make inquire. Nonetheless, in this case, Todor asked his wife by forging the director signature on this document, and BHP Billiton Ltd has not make inquire.
On the other hand, according to Northside Development Pty Ltd case, the similar situation as Three Tunas Ltd case, the circumstances of this case should have put BHP Billiton Ltd upon inquiry. Because BHP Billiton Ltd failed to make further inquiries as to whether the signatures was properly forged, so that it unable to rely on the rule in Turquand’s case.
4. BHP Billiton Ltd is large corporation where professional work and they must have notice and suspected that Three Tunas Ltd can not possibly have a personal named bank account.
S128 (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. This provision contains two elements in relation to the state of mind of the person dealing with a company.
That person either:
〉knew; Or
〉suspected;
That the assumption was incorrect.
 Taking into account the level of professionalism in such company as BHP Billiton Ltd when they received the document they must have noticed and suspected an irregularity and if so – they can not rely on Turquand's case rule and statutory assumptions in s129.
Conclusion
There was a legally enforceable contract between Three Tunas Ltd and BHP Billiton Ltd, Based on S 127(1) the form was never signed by any of the directors in this case. And the dividends were credited to a personal account. It made that Three Tunas Ltd did not receive any dividend from BHP Billiton Ltd.
According to the s 128(4), when BHP Billiton received the document, they must have notices and suspect an irregularity. But they had not done this and this mistake made Three Tunas Ltd which suffered with a loss. Therefore, BHP Billiton Ltd should compensate for the losses and agree to credit Three Tunas Ltd’s bank account for dividend payments in future.
At last, there is an advice for BHP Billiton Ltd. If they want to cover the losses, they could sue Todor and his wife to return that money.

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