Hino Group Pty Ltd v Singh and Anor [2024] NSWDC 124

Andrew Hales | Karen Hanigan | Jasper Choi

Key takeout

A director who is also a company secretary of a multi-director company, can validly execute a contract for sale of a property on the company’s behalf under section 127(1)(b) of the Corporations Act 2001 (Cth) without an additional director signatory. 

Facts

This decision concerned a contract for the sale of an ‘off the plan’ apartment in Barangaroo, Sydney with a purchase price of $7.1 million.  The contract was executed on behalf of the vendor, Hino Group Pty Ltd (Hino), by Mr Wan, who was both a director and the company secretary of the company.  At the time of execution, the other director was Mr Wan’s mother, Ms Huang.  The reason Ms Huang became a director was so she could execute documents on the company’s behalf when Mr Wan was overseas.  Her evidence was that she thought a single director could sign documents on the company’s behalf.

The defendant purchasers paid a holding deposit of $17,750 but failed to pay the $692,250 outstanding balance of the deposit.  Hino issued a notice of termination and a letter of demand for payment of the outstanding deposit.

The purchasers contested their obligation to pay the balance of the deposit, arguing that the contract was not executed in accordance with either the Corporations Act or Hino’s company constitution, thereby invalidating the agreement.

Singh challenged the validity of Mr Wan’s execution on the grounds that it was:

• not in accordance with the Corporations Act;
• not in accordance with Hino’s company constitution; and
• not validly ratified.

Decision  

The court found that the contract for sale was validly executed by Mr Wan in accordance with s 127(1)(b) of the Corporations Act and the company’s constitution.  Judgment was entered for Hino, requiring the purchasers to pay the balance of the deposit plus interest and costs. 

This decision affirms and follows Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166, which confirmed that parties dealing with a company were entitled to assume that the company’s constitution had been complied with and that a director had been duly appointed and had authority to exercise the powers customarily performed by a director of a similar company.  That included relying on execution of a document where a signature appeared above the word ‘director’ or ‘secretary’ (as the case may be) without needing to make any enquiry, and without checking the appointment or name of the director or the veracity of the signature.

The relevant clause of the company’s constitution stated that: ‘…or 1 director who is a sole director or who is both a director and company secretary may…execute a negotiable instrument or other documents’.  The court held that these words are not to be interpreted as being confined to sole director companies.

The court also concluded that even if Mr Wan failed in the manner in which he executed the contract to comply with the Corporations Act and the company’s constitution, Hino had unequivocally ratified Mr Wan’s alleged ‘unauthorised’ execution of the contract.

An argument that the serving of a letter of demand together with a notice of termination had the combined effect of extending the time to pay the balance due was also rejected by the court.