Analysis of Trusts and Agency in Australian Commercial Law LAW 8500

This case study examines the principles of trusts and agency within the context of Australian Commercial Law. The first part addresses the certainty required for creating a trust, referencing key case laws like Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation and Herdegen v Federal Commissioner of Taxation to determine whether a trust was sufficiently established regarding shares in Basil Electrical. The analysis focuses on the three certainties: intention, subject-matter, and object. The second part explores agency relationships, distinguishing between actual (express and implied) and apparent authority, citing cases like Ireland v Livingstone and Freeman & Lockyer v Buckhurst Park Properties. It assesses whether a company is bound by the actions of its director, Tina, who acted as managing director without formal appointment, concluding that the company is liable to pay the firm of architects due to Tina's implied or usual authority based on the precedent set in Watteau v Fenwick. The document concludes with a list of cited references.

Running head: TRUSTS AND AGENCY
Trusts and Agency
Name of the Student
Name of the University
Author Note

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Part 1:
In the present case, the issue is concerned with the fact that whether there was sufficient
certainty for the creation of a trust. In addressing the issue, it is important to take into
consideration the relevant case laws which will be applicable in addressing the present issue. The
research methodology that has been selected for the purpose of addressing the issue in the
research question is from both primary and secondary sources.
The concept of certainty of intention lies on the part of an individual who alleges the fact
that the nature of the trust was intentional. In cases of certainty of intention, if the creator of the
trust transfers the property with an express motive along with an expectation that the trust in the
property shall be only utilized in the particular way. The requirement of certain intention is not
dependent upon the mere intention to create trust. In case of certainty of intention, a trust can be
created on the part of the creator without mentioning the words trust and trustee which was
observed in Registrar of the Accident Compensation Tribunal (Vic) v Federal Commissioner
of Taxation (1993) 178 CLR 145. If the nature of the trust is ambiguous or created by mistake
then, it shall not be taken into consideration which was held in the cases of Lutheran Church of
Australia v Farmers Cooperative Executors & Trustees Ltd (1970) 121 CLR 628 and Boranga
v Flintoff (1997) 19 WAR 1. In the case of Commissioner of Stamp Duties v Joliffe (1920) 28
CLR 178, it was observed that a trust shall be held invalid; even if the use of express terms of the
trust were made unintentionally.
There are certain requirements referred to as the certainty of subject-matter which states
that, there is no existence of express trust without trust property. Therefore, the nature of the trust
property must be such that it can be reasonably identified. In case of certainty of subject-matter,

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issues may arise when the property in trust forms a part of a number of identical items. The
nature of the trust shall be uncertain; if the subject-matter is not specifically identified. In the
case of Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271, it was observed
that Mr. Herdegen was the holder of 59 shares which was duly registered whereas Mrs.
Herdegen was holding 41 shares. However, the shares were numbered, but the trust arose when
there was a promise on the part of Mr. Herdegen that his wife would be entitled to hold only 37
and 38 shares on the behalf of Mr. Boyden and Mr. Allen respectively. The rest of the shares will
be held by the Herdegens however; the nature of the evidence was such that is was confusing,
unclear and uncertain. In this case, it was held by the Court that, no express trust was created.
This was due to the reason that there was relevant evidence regarding the fact that whether
express trust has been created. It was also unclear that whether the trust was intentional. There
was ambiguity and uncertainty regarding the shares which were utilized for the creation of the
trusts. The evidences provided were also unclear regarding the fact that who was intended to be
the beneficiary of which bundle of shares.
The concept of certainty of objects is concerned with the fact that, there shall be failure of
trust, if there is no identification of beneficiaries with sufficient certainty. This rule is governed
by two important exceptions which can be emphasized as the charitable trusts and the anomalous
group of trusts for animals. In case of certainty of objects, the level of certainty that is required is
concerned with the fact that whether the nature of the trust is fixed or discretionary as observed
in Morice v Bishop of Durham (1804) 32 ER 656.
It is evident from the abovementioned case laws and the represented facts that, for the
purpose of creation of an express trust which is intended. There shall be three certainties which
are certainty of intention, certainty of subject-matter and certainty of object. However, in the

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present scenario, it can be observed that Basil declared himself a trustee of 5% shares from the
issuance of share capital of Basil Electrical. In the presence of 1000 shares in the name of the
company, the rest of the 50 shares were not identified. In this regard, the case of Herdegen v
Federal Commissioner of Taxation (1988) 84 ALR 271 can be applied. This is due to the reason
that, the bundle of shares in this case is unclear and there is ambiguity in the part that who was
intended to be the beneficiary of such bundle of shares. It is evident that if the subject-matter of
trust has not undergone proper identification, then such trust shall not be held as certain.
Part 2:
In this given scenario the issue that can be identified is whether the company in
consideration. An agent can be defined as person who is shares a relationship with the principal.
In a relationship of agency, the principal delegates the authority to the agent to enter into
contracts on behalf of the principal. Therefore it can be stated that in a relation of agency there
are specifically two types of contracts involved which are:
• The contract which forms between the principal and the agent and as a reason of
which it provides authorization to the agent to act on the behalf of the principal.
• Contracts made between the agents and third parties in which the agents
indemnify the principal and act on behalf of the principal.
Actual Authority:
Actual authority are mainly divided into two types. Actual authority can be delegated to
the agent by the principal expressly and authority may also be implied. It can be mentioned that
the agent generally indemnifies the principal only when such agent acts within the limits of his

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actual authority. In case he exceeds his actual authority, he may be personally liable towards the
third party for beach of implied warranty of authority.
Express authority:
It can be stated that the principal generally delegates the authority to the Agent to act on
his behalf. A principal is generally bound by the acts of the agent. However, if the agents exceed
the authority which has been delegated to him by the principals, such principals cannot be held to
be liable for the acts of the agents. However, there are several provisions under the common law
which extends the limitations of the authority entrusted to an agent for the purpose of protecting
the rights of the third parties. The case Ireland v Livingstone (1872) LR 5 HL 395 deals with the
subject of express actual authority.
It can be stated that the law implies the creation of an agency when a person in lieu of his
conduct or by his words acts as if he has derived the authority to act in the absence of his
principal acknowledges the facts that he has delegated such authority to the agent.
Implied Authority:
Implied authority can be emphasized as that authority which is not expressly delegated by
the principal to the agent but assumed to have been implied by the nature of the relationship
shared between the principal and when such authority is necessary for the agent to carry out the
duties as delegated to him by the principal. Implied authority is generally not expressly
mentioned in a contract of agency. The case Chan Yin Tee v William Jacks and Co, deals with
the implied authority delegated to agents by the principals. The case Hely-Hutchinson v
Brayhead Ltd [1968] 1 QB 549 also deals with the principals of implied actual authority.

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Apparent Authority:
Apparent Authority can also be defined as Ostensible Authority. Apparent or ostensible
authority can be defined as the authority which arises when the words of the principal or the
conduct of a principal which would lead any reasonable person of prudent nature to reasonable
believe that agent was authorized to act on behalf of the principal, even when the principal had
not delegated the authority actually. This ad been illustrated in the notable case of Freeman &
Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. Thus it can be
inferred that if the principal gives the impression to the a reasonable third party that such
principal delegated the agent to act on his behalf even though he had not actually delegated the
authority, the principal would be liable and bound by the actions of the agent.
In the case Watteau v Fenwick, it had been held by the Queen’s Bench that a third party
cannot be held liable to the principle because the third party was not aware of the fact that the
cigars were sold to the agent who was authorized within the usual authority. The landmark
decision gave rise to the concept of usual authority.
By analyzing the facts of the case, it can be stated that Tina who was appointed as the
director of the company however; he acted as the managing director with prior of the directors.
However, it can be mentioned that the Board never formally appointed her to the position.
However, Tina appointed a fir of architects to design plans for the land of the company. Thus in
this case it is evident, that Tina acted with Usual Authority or implied authority as per the
decision of the Watteau v Fenwick. It can be mentioned that the firm of architects could not have
reasonably known that Tina was acting without authority as she was on the board of directors.
Therefore the Company is liable to pay the firm of architects.

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Thus, to conclude it can be stated that the company shall be held liable to pay the firm of
architects.

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References:
Chan Yin Tee v. William Jacks and Co. (Malaya) Ltd [1964] MLJ 290.
Commissioner of Stamp Duties v Joliffe (1920) 28 CLR 178.
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549.
Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271.
Ireland v Livingstone (1872) LR 5 HL 395.
Lutheran Church of Australia v Farmers Cooperative Executors & Trustees Ltd (1970) 121 CLR
628.
Morice v Bishop of Durham (1804) 32 ER 656.
Registrar of the Accident Compensation Tribunal (Vic) v Federal Commissioner of Taxation
(1993) 178 CLR 145.
Watteau v Fenwick [1893] 1 QB 346 .