Section 129(5) of the Corporations Act permits a person
dealing with a company to assume that a document has been duly
executed by that company if it appears to have been executed in
accordance with section 127(1) of the Corporations Act. For a
company with two or more directors, that means when the document
appears to have been executed by two directors or a director and a
The application of that section was considered by the Court of
Appeal in Australia and New Zealand Banking Group Ltd v
Frenmast Pty Ltd  NSWCA 459.
The case concerned a guarantee provided by Frenmast Pty Limited
to ANZ. The document appeared to bear the signatures of two
directors but one of the signatures was forged.
ANZ relied on the assumption provisions of section 129(5). The
trial judge, Adams J., found against ANZ. His reasoning process was
The assumption only applies where a person is
"dealing" with the company
For a person to have dealings with a company in relation to a
guarantee, that person must deal with
someone with actual or ostensible authority to enter into the
ANZ dealt only with one director of Frenmast
There was no evidence that the director had actual or
ostensible authority to enter into the guarantee
Therefore ANZ's communications with the director were not
"dealings" with the company.
The Court of Appeal found Justice Adam's reasoning to be
flawed. In overturning the decision, it found that it was not
necessary for ANZ to deal with a person that has authority to bind
the company. All that was required by the Act was that ANZ had
dealings with a person with authority to negotiate the
The Court found that the director had authority to negotiate.
The director had been the principal point of contact for ANZ for a
number of years and the other director was aware of that fact. ANZ
was entitled to assume that the director had authority to negotiate
the guarantee with the bank.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
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