Reference no: EM133233216

Question: Mr & Mrs Boss operate a popular transport business in Darwin through a company called 'Cash R Us Pty Ltd'. Mrs Boss is a director of the company and Mr Boss is also a director and secretary of the company. The shareholders in the company are:

Mr&Mrs Boss 50%; and
Mr Daniels 50%.
Mrs Boss goes to Eastside Bank where 'Cash R Us Pty Ltd' has its accounts and asked to borrow $500,000. Eastside Bank has been the company's banker for many years and the bank manager knows Mr & Mrs Boss reasonably well.

Mrs Boss tells the bank manager that she wants the money to invest in a pine plantation which would give the company substantial tax benefits. The bank manager thinks this is rather odd but makes no further enquiries and agrees to lend the money as long as it can take security over the company's major asset which is the building from which 'Cash R Us operates from.

Mrs Boss obtains the loan and mortgage documents from the bank. She affixes the common seal of Go Go transport Pty Ltd and forges her husband's signature as secretary. The bank advances the money to Mrs Boss's personal account.

Mrs Boss invests the money, however the pine plantation was a scam and never existed. Mrs Boss did not undertake any research into the pine plantation and relied solely on her friend for advice (her friend had no experience in business). Nor did Mrs Boss advice or husband of the loan or the investment.

Eastside bank becomes aware that the pine plantation was a scam and has requested Go Go Transport Pty Ltd pay back the outstanding loan.

Explain how a company can execute a contract under the Corporations Act 2001 (Cth).

Explain whether Eastside Bank can enforce its mortgage over the building and whether it can rely on the assumptions in s129 of the Corporations Act.

Could there be an exception to the assumptions by way of s128(4)Of the Corporations Act?

Explain whether Mrs Boss has breached her duty of care as a director under section 180 of the Corporations Act. Will Mrs Boss be able to rely on the Business Judgement Rule contained in section 180(2) of the Corporations Act?