Mercedes-Benz (NSW) Pty Ltd v National Mutual Royal Savings Bank Ltd

In *Mercedes-Benz (NSW) Pty Ltd v National Mutual Royal Savings Bank Ltd* [1996] NSWCA 363, the New South Wales Court of Appeal considered a dispute between Mercedes-Benz (NSW) Pty Ltd (the appellant) and National Mutual Royal Savings Bank Ltd (the respondent). The case concerned the enforceability of a guarantee provided by the respondent in favour of the appellant.

The central legal issue before the Court of Appeal was whether the respondent was bound by the guarantee, notwithstanding that the guarantee was executed by an individual who, at the time of execution, was not a director of the respondent company. The Court had to determine if the individual had the actual or ostensible authority to bind the respondent to the guarantee.

The Court of Appeal found that the individual who executed the guarantee did not have actual authority to do so, as they were not a director of the respondent company at the time. However, the Court held that the respondent was estopped from denying the authority of the individual to execute the guarantee. This was based on the principle of ostensible authority, where the respondent had represented to the appellant that the individual had the authority to act on its behalf, and the appellant had relied on this representation to its detriment. The Court applied the principles established in cases concerning the apparent authority of company officers, emphasizing the importance of representations made by the company itself.

The appeal was dismissed, with the Court of Appeal affirming the decision of the lower court.