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 February 2018 to 1 February 2021. The company does not have its own constitution. An employment contract had been signed between Steptoe and James. One of the terms of the employment contract restricted James from borrowing more than $10,000 on behalf of the company.

James was not formally reappointed 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 ASIC.

On 1 May 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 as managing director of Steptoe. 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 one of the island states in the south Pacific.

Steptoe now seeks your advice as to whether they are bound by the loan contract with Willis Bank.

NOTE:

1. Identification of issues.
2. Identification of the source of the law on each issue: case law, statute.
3. Accurate explanation or justification of the relevant law on each issue.
4. Application of the relevant law to each issue