Case Study
Assessment task
Trusts (this part is worth 15 marks)
The course includes the study of trusts - a complex area of the law. The creation of an express trust (i.e. one intended created and not arising by law or fact) requires ‘three certainties.’ They are;
- 👉 Certainty of intention
- 👉 Certainty of subject matter (trust property)
- 👉 Certainty of object (beneficiary or purpose)
Scenario
Basil declared himself trustee of 5% of the issued share capital of Basil Electrical Co Pty Ltd. There were 1000 shares in the company. There was no further identification of the 50 shares held on trust.
Assessment tasks
Is there sufficient certainty for creation of a trust? In addressing this question identify theresearch question, explain the relevant law succinctly relating to the research question and then discuss your research methodology, and finally provide an answer to the question.
Agency (this part is worth 15%)
A key issue in the law of agency is the authority of the agent. In order to bind the principle by the actions of the agent, the agent must have been acting within some level of authority. The authority of the agent comprises:
- 👉 Express actual authority
- 👉 Implied actual authority
- 👉 Ostensible authority
You have a small problem scenario, but this time dealing with agency. The same instructions apply, addressing the research question and methodology. You are simply adapting the requirements to address this new research problem.
Scenario
Tina and Susie formed a company to acquire and develop land. The board of directors comprised Tina and Susie, and a nominee of each. The development of the land was left to Tina who, with the knowledge of the Board of Directors, acted as Managing Director, although she had never been formally appointed to the position. Tina employed a firm of architects to design plans for the land. They issued a bill to the company but this remained unpaid. Later the architects sued the company for payment of their fees for work they have done.
Assessment tasks
Is the company liable for the architect’s fees? In addressing this question identify theresearch question, explain the relevant law succinctly relating to the research question and then discuss your research methodology, and finally provide an answer to the question.
Solutions
Is there sufficient certainty for the creation of a trust?
Trusts all over the world are used on a wider scale for either business purpose or for investing purpose. A trust, in general, can be defined as an obligation which has been imposed upon a person or an individual to hold properties for other beneficiaries but the trust is not regarded as a separate legal entity in law. In taxation law, however, the trust which has been duly created is treated as a tax paying entity working on behalf of the intended beneficiaries. The person who operates the trust hold office for the benefit of the beneficiaries and is also given the responsibilities of managing the properties and assets for the benefit of the beneficiaries and also for managing the business of the trust assets and affairs. One of the jobs of the trustee is to get the trust registered as a tax paying entity in Australia and paying taxes in time.
Simply put Trust is the creation of a relationship in which a person A is put in charge of some assets which is intended for the benefit of another person named B and thus is mandated to run the affairs of the said assets solely for the benefit of B. A being entrusted with the duty of managing the assets under trust would be regarded as the legal owner of the trust property. No of trustees and no of beneficiaries can be one or more than one. However, where there is only one trustee in relation to a trust, the trustee must be a different person than the beneficiary for the trust operations to be valid(Clarkson, Business Law, text and cases, 2012).
A trust is a definitive relationship between the trustee and the beneficiary and the trustee is needed to hold the assets or the equity for the benefit of the intended beneficiary and hence the validity of the trust is required so that the trust relationship and working can be enforceable under law. Three certainties are required to be present for trust to be validly created and capable of being legally enforced:
Certainty of Intention
For a trust to be validly created, there must be an intention for the creation of a trust. Here the settlor's intention has to be interpreted by the court whether there is a clear intention on the part of the settlor to create a relationship of trust. There must be the presence of an intention to create a binding obligation for the benefit of the beneficiary. Words such as hope and wish do not work legally in creating a trust(Hargovan, 2014).
Further, the individual who is declaring the creation of a trust and transferring the assets to the trust for being managed by the trustee (designated) must also be required to be the owner of the property or cash or other such assets. So if the intention to create a trust is there, written words are not always necessary and spoken worlds might be sufficient for the creation of a trust and in those cases, the trustee would need to use his discretion for running the affairs of the trust.
The certainty of subject matter
The general regulation is that the assets of the trust must be easily identifiable. If the assets under the trust are not identifiable then the trust is destined to fail. Thus the second requirement is that the trust find must be ascertainable clearly (Hemmens v Wilson Browne (a firm) [1995]
Certainty of object
The certainty of the object here means the beneficiaries of a trust must be certain and capable f being identified with certainty. For example, the settlor intended the trustee to undertake the affairs of the trust for the benefit of his son or his / her children. In both cases, the beneficiaries can be identified and hence the object is certain. Hence if the objects are not certain then the trust fails(Clarkson, BUSINESS LAW, TEXT & CASES, 2012).
Analysis and Opinion to the Question Raised
