December 2013

When you receive a contract signed by the director and secretary of a company, is the contract validly executed when it is later revealed that one of the signatures was forged? This was the question before the NSW Court of Appeal in the case Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd.

Background

ANZ had provided facilities to Frenmast, one of a group of companies involved in a manufacturing business carried on by three brothers. ANZ also obtained a guarantee from Frenmast for the loans it made to one of the other companies and to one of the brothers, Robert Tiricovski.The guarantee was purportedly executed by Frenmast, containing the signatures of Robert Tiricovski, a director and the company secretary, and Vlado Tirikovski, a director, in line with s127(1)(a) or (b) of the Corporations Act 2001 (the Act). Vlado's signature was revealed to have been forged.

Issues

ANZ argued that, despite the forgery, it could rely on the guarantee as, due to ss 128 and 129(5) of the Act, it was entitled to 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). Importantly, s 128 allows a person to make those assumptions "even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings".

The case looked at two key issues regarding the dealing, namely:

  • were there dealings concerning the guarantee between ANZ and Frenmast? and
  • were the dealings required to be with someone having actual or ostensible authority to enter into the guarantee?

Were there dealings concerning the guarantee between ANZ and Frenmast?

The Court noted that ANZ had sent letters of offer to Robert to vary the existing facilities and for a new guarantee from the company. The letters included acknowledgements and a guarantee to be signed by the company. These were signed by Robert and contained Vlado's forged signature. Robert returned them to the ANZ, purporting to act on Frenmast's behalf.The Court of Appeal held that these communications were sufficient dealings concerning the guarantee, as they were dealings between ANZ and Robert, as a director of Frenmast who purported to act on the company's behalf, involving the taking of the guarantee.

Were the dealings required to be with someone having actual or ostensible authority to enter into the guarantee?

The next question was whether Robert had actual or ostensible authority to conduct communications on behalf of Frenmast. The Court noted that Frenmast had allowed Robert to undertake negotiations with ANZ on similar matters over several years and, as a result, this had created actual or ostensible authority for Robert to be the point of communication between ANZ and the company. This was enough for ANZ to be entitled to assume that the guarantee was validly executed under s129 of the Act.

What this means for agencies

While the Court permitted ANZ to rely on the assumptions in s129 of the Act in this case, a number of questions remain about the scope of the operation of the section.

In particular, it is unclear what history of dealing is required to constitute a "dealing", which is needed before the section can be relied on. For example, what would happen in circumstances where a third party is seeking to rely on the statutory assumptions in relation to a document, and there have been no other dealings?