NSW Court of Appeal Clarifies Limits of Director Authority in Closely Held Companies Mende v Kundrun [2026] NSWCA 1

The New South Wales Court of Appeal has delivered an important decision for directors, shareholders and boards of closely‑held proprietary companies.

In Mende v Kundrun [2026] NSWCA 1, the Court confirmed that a director cannot unilaterally bind a company—particularly in relation to major decisions such as terminating senior executives—unless the company itself has expressly or impliedly conferred that authority.

The case is a timely reminder of the importance of corporate governance, and that informal practices or influence do not equate to legal authority.

Background

AMCI Investments Pty Ltd (AIPL) was jointly owned 50/50 by Mr Hans Mende and Mr Fritz Kundrun. AIPL employed a Mr Jamie Frankcombe as “Head of Australian Coal Operations”, under an employment agreement signed in 2024.

In 2025, Mr Mende purported to terminate Mr Frankcombe’s employment by issuing a termination letter on the letterhead of a different company called AMCI Group LLC.   This was a Delaware “series LLC” also co‑owned by the two men. He asserted that his role as Executive Chairman of AMCI Group LLC gave him “complete authority” over operations, and therefore the power to terminate Mr Frankcombe’s employment with AIPL.

In an earlier case, the primary judge rejected that argument. The Court of Appeal has now dismissed Mr Mende’s appeal.

Reasons

The Court of Appeal broadly found that:

1. Authority must come from the company whose rights are affected. Because AIPL and AMCI Group LLC were separate legal entities, this meant that authority conferred by one does not translate to authority over the other. The fact that AMCI Group LLC granted Mr Mende broad operational authority did not empower him to alter AIPL’s contractual relations.
2. Authority must be express. There was no express delegation from AIPL authorising Mr Mende to terminate employment contracts. The Court said that “The width of authority conferred by [AMCI Group LLC] has no bearing on the authority conferred on him by [AIPL].” (at [36])
3. There was no implied authority. The Court rejected the argument that a long‑standing practice of Mr Mende being a key decision‑maker amounted to implied actual authority to bind AIPL. The Court said: “There was no admissible evidence of Mr Mende directly exercising authority… in respect of AIPL as distinct from other companies.” (at [39]).  Even if informal practices had existed, they were overtaken by explicit correspondence from Mr Kundrun in April–June 2025 insisting that AIPL decisions be made in accordance with its constitution.
4. Withdrawal of any prior acquiescence. Although unnecessary to the outcome, the Court noted that even if implied authority had existed, it had been withdrawn by the time of the purported termination. Letters from Mr Kundrun in April, May and June 2025 expressly objected to unilateral decision‑making.

Conclusions and Takeaways

The key points from this decision include:

• A director—even a 50% shareholder—cannot bind the company, unless the company has formally conferred that authority.
• Authority granted by a related entity (even one with overlapping ownership and management) does not extend to an Australian subsidiary or affiliate.
• Delegations should be documented. If boards expect an executive chair, managing director or key individual to make operational decisions, then this should be expressly delegated under the constitution or board resolutions.
• Informal practices are fragile. Even long‑standing informal arrangements can be displaced by later communications insisting on compliance with the constitution.
• Significant corporate actions should be supported by a formal delegation, or by a decision of the board as a whole.