Discuss all of the claims, counter claims, defence and remedies which can be raised by various parties.

Willy Joki was the sole director and only shareholder of Bluster Construction Ltd. When the construction industry was strong he borrowed $250,000 from the bank. The security agreement gave the bank a fixed charge against the following assets: 1/ Crane truck which was purchased for $35,000; 2/ Framing machine which was purchased for $125,000; 3/ Cutting machine which was purchased for $50,000. The bank registered the security agreement on March 1. 

However, the serial number of the Crane truck was improperly transcribed. The bank then advanced all the funds. In October the bank manager became concerned about the money lent. The construction industry was in a recession because of high interest rates. The bank manager received a directive form the bank's head office telling all bank managers that outstanding loans to construction companies must be reduced by 30%. The bank manager then gave Willy an unlimited guarantee for all of the loans of the company and required he, his wife and his father to sign it. Willy took it home where he, his wife and his father signed it after Willy said to them that it was a temporary loan to the company. The guarantee was returned to the bank manager.

 The company continued to make all payments as they became due to the bank. However, the rent on the premises which held the framing and cutting machine fell into arrears in the sum of $20,000. Two weeks later the bank manger, following the directive, demanded that Willy repay $75,000 of the outstanding loan. The company did not have the money at the time but Willy endorsed a cheque in the sum of $25,000, which he received from the owner for job site A, but told the bank that they were not to cash it because the cheque was conditional on completing that job. 

The company then assigned all of the proceeds for job site B ($50,000) to the bank. Willy told the bank manger that the job would not be completed and the moneys would not be due and owing until December 27. Sensing pending difficulties Willy went to Lender 2 and borrowed $40,000 and gave it to his wife. Lender 2 knew of the previous security agreement with the bank but when it did a computer search he discovered the error in the serial number. This security agreement took as collateral the crane truck and all accounts receivable. It was properly registered. The next day the bank called the loan and immediately appointed a receiver. The landlord seized the cutting machine and refused to let the bank sell it. The bank sold the framing machine to another customer of the bank for $30,000. 

Answer rating: 100% (QA)

A Corporation is a legal body that operates solely in the light of statute and in the case of its actual absence it can not handle its activities on its own under which it appoints the Board of Direct... View the full answer