Mooneralogy Pty Ltd carries on a successful mining operation extracting oxygen from Moon rocks. It has two directors: Gabriel, the managing director, and his younger sister Dora. Dora is also the company secretary.Apart from a small but very well-equipped space centre in the middle of Australia, it has a small number of reusable rockets, each of which is very valuable. It has a contract with the Wollongong Uni's Robotics Department for the supply of fully autonomous moon-rovers, capable of being sent to the Moon, and of mining oxygen, packaging it into airtight containers, and then depositing the containers into Mooneralogy Pty Ltd's re-useable rockets.

Gabriel and Dora used to be very close, but their relationship has become increasingly strained because Dora wants to expand operations to explore for alien life. Gabriel points out that this is not in Mooneralogy Pty Ltd's Constitution, and that as company secretary, Dora should know better. Fed-up with Dora's obsession with aliens, Gabriel decides to move out of the penthouse apartment he shares with Dora in Sydney, overlooking the Opera House. Gabriel moves into a caravan located on the grounds of Mooneralogy's space centre in the middle of Australia.

The apartment Dora lives in is very valuable. It was purchased by Mooneralogy Pty Ltd some years ago, and thanks to improvements that have been made (in particular, a telescope observatory built on the apartment roof by Dora), it is now worth $5 million. Dora meanwhile is so certain that there are aliens just waiting to make contact, she stays up every night looking through her telescope for alien spaceships. As a result, she sleeps all day and completely neglects her duties to Mooneralogy Pty Ltd.

Gabriel, stuck out in the middle of Australia, becomes an online gambling addict. He falls rapidly into debt. As a result, he takes out a loan with Columbia Bank for $2 million. He decides he will bet the whole amount on a horse race and is so certain that he can pick a winner that he is confident he will be able to pay off all his gambling debts. But he needs collateral for the loan. Unfortunately, he has very few assets. He has a wonderful collection of Moon rocks, but Columbia Bank will not accept these. In desperation to get the loan, he secures a mortgage over the Sydney apartment that Dora lives in. The mortgage is executed under the company's seal, witnessed by Gabriel in his capacity as a director, and Trish, as company secretary. Mooneralogy Pty Ltd's constitution clearly states that any loans must have approval from the board of directors. Gabriel had not done this. When Columbia Bank executed the mortgage, they did so thinking that Dora had resigned, so that she could devote all her time to studying the night sky, looking for aliens, and that Trish had been appointed to replace Dora as company secretary. The bank staff were quite surprised to hear thisbecause in all their dealings with Gabriel and Dora they had always appeared very close, and the bank knew this was a brother and sister operation. They were also told that Dora, who had always been very friendly and outgoing had become a recluse, and refused to speak to anyone. Columbia Bank sends a valuer around to the apartment in Sydney, and so Dora becomes aware that Gabriel has mortgaged her beautiful apartment with its unique telescope observatory on the roof. She is very angry and says as far as she is concerned Mooneralogy Pty Ltd is not bound by the mortgage.

questions :

(a) Can Columbia Bank enforce the mortgage? Why or why not?

(b) Identify and assess arguments that may be used by Mooneralogy Pty Ltd in defence of any action for enforcement of the contract by Columbia Bank.