Were there dealings concerning the guarantee between ANZ and Frenmast?
21Section 128(1) provides:
"A person is entitled to make the assumptions in s 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect."
22Those 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).
23The assumptions in s 129 which may be made under s 128 relevantly include:
"(4) A person may assume that the officers and agents of the company properly perform their duties to the company.
(5) 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)."
24By subsection 127(1) a company may execute a document without using a common seal if the document is signed by either "(a) 2 directors of the company; or (b) a director and a company secretary of the company".
25Here it appeared from the information provided by Frenmast that was available to the public from ASIC, that the directors of Frenmast were Robert and Vlado and that Robert was company secretary. On the guarantee as signed the signature of Robert appeared as director and the purported signature of Vlado appeared as company secretary. It nevertheless remained the position that the guarantee appeared to be signed by two directors so as to satisfy the condition in s 127(1)(a). In Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 at 364, the equivalent condition in s 68A(3)(e) of the Companies (Vic) Code was held to have been satisfied in circumstances where one director had signed as secretary. The primary judge was correct to conclude that this matter was of no significance: [42]. In Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 at 732, Gleeson CJ expressed agreement with that conclusion although the question did not arise for consideration in that case.
26In relation to whether there had been dealings between ANZ and Frenmast, the primary judge made the following findings:
"[43] ... As has already been mentioned, no evidence was produced by the bank as to the circumstances in which the guarantee came into existence. That it dealt with Robert as director of Frenmast at the time is a distinct possibility, of course, but the evidence is not such as to permit such an inference to be drawn to the point of probability.
[44] ... I have already mentioned that there is not even any evidence that the bank dealt with Robert in connexion with the transaction either as Frenmast's agent or, indeed, at all."
At [50] the primary judge repeated his conclusion that ANZ did not deal with Frenmast in relation to the guarantee.
27In my view these findings involved error. They do not take into account the letters of 3 September 2008 and the signed acknowledgements and guarantee, and the fact that each was returned to ANZ on or about that date.
28The acknowledgements enclosed with each of the letters of 3 September 2008 were the subject of a request directed to Frenmast that they be signed and returned to ANZ. Each was at least signed by Robert as a director, dated and returned to ANZ on that day. For that to have occurred each had to have been communicated to and considered by Robert in his capacity as a director of Frenmast and then returned to ANZ either directly or by the agency of AFC or himself or Slavica. On any view there were written communications by ANZ to Frenmast which were responded to by the signing and return of the acknowledgements.
29The subject matter of those communications was the guarantee proposed by the letters of offer. Specifically, they included an acknowledgement on behalf of Frenmast that in relation to the "Variation letter dated 03 September 2008 ... ii) the securities given, or to be given by [the guarantor] secure all present and future obligations of the Client(s) to ANZ, including obligations in respect of the facilities".
30At the same time the guarantee was signed and returned to ANZ. That also involved the transmission of the guarantee to Frenmast for execution and return. The signed guarantee was then returned, or arranged to be returned, by Robert purporting to act on behalf of Frenmast.
31These communications constituted a dealing or dealings between ANZ and Robert, as a director of Frenmast and purporting to act on its behalf. Each related to the taking of the guarantee. The primary judge's conclusion that the evidence did not permit such a finding on the balance of probabilities was wrong.
32There then arises the question whether Robert had actual or ostensible authority to engage in those communications on Frenmast's behalf. That is a different question from whether he had actual or ostensible authority to bind Frenmast to a guarantee in the terms sought.
33Since at least 2001 ANZ had been communicating in writing with Robert in relation to the banking facilities of himself and Slavica, Frenmast, AFC and RV. Before 2006 the communications in relation to Frenmast were taking place with the knowledge and agreement of Vlado and Steve. After 2006 they must be taken to have known, notwithstanding that they were no longer actively participating in the business of Frenmast, that Robert was continuing to act on its behalf in day to day communications with the ANZ concerning its ongoing banking facilities.
34In those circumstances, by their conduct over a period which commenced before 2000, Vlado and Steve created an apparent authority in Robert to be at least the point of communication between ANZ and Frenmast. They were the other shareholders and directors of Frenmast and, together with Robert, as the three directors of the company, had actual authority to manage Frenmast's business. By their conduct, as was confirmed by their oral evidence (see [12] and [13] above), they permitted Robert to manage Frenmast's banking relationship with ANZ. That management included receiving and responding to communications from ANZ.
35The relevant principles were stated by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Magnal) Ltd [1964] 2 QB 480 at 505-506 and applied by the High Court in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd [1975] HCA 49; 133 CLR 72 at 78. Those principles are not limited to the ostensible authority of an agent to bind his principal to a contract. They apply equally to other acts by an agent including, for example, the making of representations in the course of communications with a third party: Armagas Ltd v Mundogas SA [1986] 1 AC 717 at 732; Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; 170 CLR 146 at 172 (Brennan J).
36Frenmast submits that even if Robert had ostensible authority to have communications with ANZ on its behalf, his actual authority did not extend to communications concerning a guarantee of the facilities of AFC and Robert and Slavica because that transaction was solely for his or their benefit and not for the benefit of Frenmast. The principle relied upon is that if a third party has notice of an agent's lack of actual authority, it cannot rely on the agent as having ostensible authority to do the relevant act. That is because, in such circumstances, the third party will not have relied on the agent as held out as possessing the relevant authority. That principle is referred to and applied by Griffith CJ in Lysaght Bros & Co Ltd v Falk [1905] HCA 7; 2 CLR 421 at 431.
37This principle does not apply in the present case. ANZ is not shown to have had notice, if it was the fact, that Robert was acting contrary to the interests of Frenmast and solely in his own interests. ANZ was entitled to assume by reason of ss 128(1) and 129(4) of the Act that Robert, as a director, was properly performing his duties and accordingly acting with care and diligence, in good faith and in the best interests of Frenmast and for a proper purpose; and Frenmast is debarred from asserting to the contrary: Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13; 79 ALJR 825 at [58]. There, the argument that Mr Voss could not have been acting on behalf of the company of which he was a director as he was acting contrary to its interests was rejected because the party with whom he was dealing was entitled to make the assumption in s 129(4). It was also not obvious, or necessarily the case, that the proposed guarantee was not in Frenmast's interests. The giving of the guarantee was a matter for the commercial judgment of the directors of Frenmast. There was a connection between its business and that of AFC. Its factory was used for the manufacture of liquorice products by RV which were sold to AFC. Frenmast also had the benefit of guarantees of its indebtedness to ANZ from Robert and AFC and Robert was a shareholder of Frenmast.
38Accordingly, the position was that there were purported dealings concerning the guarantee between ANZ and Frenmast. Those dealings were undertaken by Robert on behalf of Frenmast and it was within his actual or ostensible authority to do so. It remains to be considered whether, as the primary judge held, it was also necessary that he have actual or ostensible authority to enter into the guarantee transaction before ANZ was entitled to make the assumptions in s 129 in relation to those dealings.