Steptoe Pty Ltd (Steptoe) operates a small chain of retail shoe stores. James was appointed as managing director for a period of three years from 1 December 2017 to 1 December 2020. A service contract had been signed between Steptoe and James. One of the terms of the contract restricted James from borrowing on behalf of the company unless a proposal had been tabled in a Board of Directors' meeting and approved unanimously. The constitution of Steptoe also provides that the company be precluded from entering any contract (including loan contracts) more than $250,000 without a directors' resolution.

James was not formally re-appointed at the end of the three years, but he continued to carry out the duties of managing director. No new document of appointment was lodged with Australian Securities and Investment Commission (ASIC).

On 1 February 2021, James went to the Willis Bank and asked to borrow $3,000,000 on behalf of Steptoe. Willis Bank had been the main banker for Steptoe for the last 15 years. James told the bank that the money was needed to purchase an interest in a pine plantation which would give the company substantial tax benefits. James signed the loan contract on behalf of Steptoe without informing the Board of Directors. The bank advanced the money by a cheque payment payable to Steptoe. James misappropriated this money by diverting it into a similarly named account at another bank. He is now believed to be living in Vanuatu or in one of the island states in the South Pacific.

Advise Steptoe as to whether they are bound by the loan contract. Your answer should include case law and the provisions of the Corporations Act 2001 (where relevant).