A former director of the borrower had executed the loan agreement. Nevertheless the Court noted:
Persons who assume a position of director though not validly appointed (de facto director) may also attract the duties and liabilities attached to that office. A de facto director includes a person who purports to resign as director but who continues to act as a director and a person who is removed as a director but who continues to act as a director.
This rule is based on the definition of director in the Corporations Act which includes:
A person who is not validly appointed as a director if they acted in the position of a director.
The court held this allowed the lender to rely on the assumption in section 129(3) of the Corporations Act which reads:
A person may assume that anyone who is held out by the company to be an officer of the company has been duly appointed; and has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer.
Hence the mortgage was found binding.
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