BuildIt Pty Ltd was incorporated in 2009. The shareholders are John and Eloise Hastings (one each), Mr Angelo (one) and Mr Allan (one). Initially, Mr Allan and Mr Hastings were the directors and secretaries of BuildIt Pty Ltd. On 2nd September 2010, BuildIt Pty Ltd purchased the property 22-25 Wilkinson Street, apparently as trustee of what was called the Gilbert Sandler Family Unit Trust. The units in that trust were owned equally by Silver Water Pty Ltd ("Silver Water"), a company associated with Mr Hastings, and by P & M Pty Ltd. An agreement concerning this development was made in about November 2010 between BuildIt Pty Ltd, Silver Water, P & M, Mr Hastings, Mr Angelo, and Mr Allan.

BuildIt Pty Ltd has a constitution but it only includes the following two articles:

Article 1 - Subject to any rules and procedures set out in this constitution, the business of the company is to be managed by or under the direction of the directors.

Article 2 - The company cannot enter into any contract the amount of which exceeds $500,000 in any calendar year unless that transaction has been approved by ordinary resolution in a general meeting of members.

The constitution does not exclude the replaceable rules. The replaceable rules therefore apply to the company, with the exception of any replaceable rule that conflicts with an article in the company's constitution.

As at 2010, Mr and Mrs Mark had known Mr and Mrs Hastings for about 20 years. That year, Mr Hastings spoke to Mr and Mrs Mark about their using the equity in their house to raise money, which could be invested to earn a good return. In August 2010, Mr and Mrs Mark were introduced to Mr Angelo at the home of Mr and Mrs Hastings who discussed the possibility of Mr and Mrs Mark investing in the Wilkinson Street development site.

At about the same time, there was a meeting at Mr and Mrs Mark' home between Mr and Mrs Mark and Mr Angelo. There was a conversation in which Mr Angelo asked for a loan of $600,000.00 for use in the Wilkinson Street development, on the basis he would arrange a loan to them of that amount from the National Australia Bank, would pay all costs associated with the loan, and would pay them $725,000.00 after twelve months. Mr Mark then asked for security, and Mr Angelo said they could have one of the units, which he said was worth over $725,000.00. Mr Angelo said he would ask his solicitor to draft an agreement and fax it to Mr and Mrs Mark' solicitor Marina Harry.

On 2nd October 2010, Mr and Mrs Mark entered into an agreement with Angelo, whereby they were to lend Mr Angelo $600,000.00, for use in a development at 22-25 Wilkinson Street, Glendale (First Agreement). Under that agreement, Mr Angelo was to be responsible for fees and interest incurred by Mr and Mrs Mark in obtaining the $600,000 and was to pay them $725,000 upon completion of the development or after fourteen months, whichever was the earlier.

Mr and Mrs Mark also entered into an agreement on 2nd October 2010, with BuildIt Pty Ltd, the owner of 22-25 Wilkinson Street (Second Agreement). This agreement was concluded as a security arrangement whereby Mr and Mrs Mark would be able to purchase Unit 1 in the proposed development for $1,000 if Mr Angelo fails to repay his loan.

The National Australia Bank approved a loan of $600,000.00 to Mr and Mrs Mark, on the security of their home. On 5th October 2010, Mr Mark handed to the National Australia Bank the title deed to Mr and Mrs Mark' home. On 12th October 2010, Mr and Mrs Mark' solicitor Ms Harry obtained a company extract relating to BuildIt Pty Ltd, showing that Mr Hastings and Mr Angelo were the directors and also the secretaries of BuildIt Pty Ltd.

On 20th October 2010, Ms Harry sent a facsimile to Mr Angus, the solicitor acting for BuildIt Pty Ltd in the transaction. This fax was in the following terms:

1. We act for Mr & Mrs Mark and note that you act for BuildIt Pty Ltd Pty Ltd. 2. The agreement has been reached that our clients lend to your client the sum of $600,000 towards the development of ten (10) strata units at 22-25 Wilkinson Street, Glendale. 3. Your client undertakes upon completion of the abovesaid development but not exceeding 14 months from today to repay to our client the sum of $725,000 plus all interest and associated bank charges. 4. To secure their loan our clients wish to execute a Second Agreement for the purchase of Unit 1 at the abovesaid development at a nominal price of $1,000. A special condition is to be included that if the loan is repaid then our clients will not be exercising their right to purchase of the above property. 5. In the circumstances would you kindly confirm the above with your client and forward us the relevant documents as soon as possible.

The Second Agreement between BuildIt Pty Ltd and Mr and Mrs Mark was executed by Mr and Mrs Mark on 23rd October 2010. The Second Agreement bears the common seal of BuildIt Pty Ltd, and the signatures of Mr Hastings as director and of Mr Allan as secretary. While the signature purporting to be that of a director has some similarity to Mr Hastings's signature, Mr Hastings denies that this is his signature, and denies executing this document at all. It is also the case that at the time of signature, Mr Allan was neither a director not a secretary of BuildIt Pty Ltd having resigned in September 2010 and replaced in both capacities by Mr Angelo. Mr Allan was not included among the names of persons held out by the company to be directors or secretaries of the company or shown on information provided by the company to ASIC to be directors or secretaries of the company. Also on 23rd October 2010, Mr Angus wrote to Ms Harry confirming the exchange of the Second Agreement and enclosing a copy of a loan agreement executed by Mr Angelo.

Mr Hastings said that Mr Angelo told him around this time that he had borrowed $600,000.00 from Mr and Mrs Mark, and that Mr and Mrs Mark were to enter into a Second Agreement for $1,000.00 to buy Unit 1 for $725,000.00. Mr Hastings gave evidence that he drove to Mr Angus's office with Mr Allan; that while he waited in the car, Mr Allan apparently went to Mr Angus's office, and came back with a two-page document, which Mr Allan told him was a Second Agreement for $1,000.00 providing for a purchase price of $725,000.00; that he signed this document on his lap while in the car but without reading it; and that Mr Allan then apparently took the document back to Mr Angus's office. Mr Hastings also gave evidence that the common seal of BuildIt Pty Ltd was kept by Mr Angelo and Mr Allan at their offices in Newcastle West, and that mail to BuildIt Pty Ltd also went to those offices. Mr Hastings's own office was at his home.

In about October 2011, the relationship between Mr and Mrs Hastings on the one hand, and Mr Angelo and Mr Allan on the other, became strained, because Mr and Mrs Hastings became concerned about the standard of the development work. The Second Agreement asserted that the money lent was for Wilkinson Street, a project of BuildIt Pty Ltd; yet the money was paid to Mr Angelo and not shown to have been passed on to BuildIt Pty Ltd or used in the Wilkinson Street development. The signature on the Second Agreement purporting to be that of Mr Hastings appears very different from Mr Hastings' signature. In about early April 2011, Mr and Mrs Hastings met with their solicitor to discuss the possibility of a separation from Mr Angelo and Mr Allan. During that meeting, Mr Angus told Mr and Mrs Hastings that Unit 1 had been sold to Mr and Mrs Mark for $1,000 if Mr Angelo did not repay their loan to them. According to Mr and Mrs Hastings, this was the first time that they had any idea that this was so.

In November 2011, Mr Mark asked Mr Angelo for "finalisation" and Mr Angelo told Mr Mark that he did not have the money to repay. Mr and Mrs Mark then instructed their solicitor, Ms Harry, to act on the Second Agreement to purchase Unit 1 for $1,000. In March 2012, Mr Angelo stopped paying interest on the NAB loan and a suit was brought on 13th June 2012.

QUESTION

What is the proper way, in terms of procedure and authority, to conclude the Second Agreement?

Note: In the process of working your way through answering this question, you should make sure you always state the source of the relevant legal rules (e.g., a section of the Corporations Act or a court case) and apply those legal rules to the facts. You may also find it useful to argue 'in the alternative'. For example, if you argue that the court would likely find that there was authority to conclude the Second Agreement, then (in addition to exploring the legal implications of this) you may want to write something like: