LAW 8500 - Express Trust and Director Liability in Australian Law

This assignment provides a detailed analysis of two key legal issues under Australian Commercial and Corporations Law. The first task examines whether all certainty requirements are satisfied for the formation of an express trust, focusing on the clarity of intention, subject matter, and object with ref...Read More

Australian Commercial and Corporation Law

Table of Contents
Task 1.........................................................................................................................................3
Task 2.........................................................................................................................................4
References..................................................................................................................................6

Task 1
Research Question - Are all the certainty requirements are being satisfied for the formation
of an express trust?
Relevant Law - The enforceability of an express trust depends on the proof of certainty in
three aspects that include intention to create trust, subject matter and objects. Along with
satisfying three certainty aspects and not invading public policy prohibitions regarding
formation of trusts, it is essential that an express trust must have been created validly
(Cambridge University Press , 2018). Such a trust must be declared in a proper manner and
title to the property of the trust must be vested in the trustee in a proper manner. In addition to
it, some of the trusts must be following the statutory formalities. Unless these requirements
are satisfied, it will not be considered as enforceable or valid relying on the relevant statutory
provision. The express trust is created when the settlor creates a trust affirming himself or
herself as a trustee of property or transferring to another trustee (Reuters, 2019). However,
express trust is formed as per the purpose of the settlor. The interpretation of the intent to
create an express trust may be made by court, if it is decided that parties want to form
equitable interest in third party and trust relationship is considered as suitable reason to create
that purpose (Austlii, 2014). Until now, the trust is enforced when a person accepts property
based on insufficiently evidenced trust. The Court of Appeal in Rochefoucauld v. Boustead
[1897] I Ch. 196 has also considered it as an express trust (Law Teacher, 2018).
Research Methodology - For the research purpose, relevant case law examples and relevant
data will be obtained from the online sources in order to address the issue.
Analysis - As the formation of express trust involves three certainties i.e. certainty of
intention, subject matter (property of trust) and object (beneficiary or purpose). Basil
Electrical Co. Pty Ltd. has 1000 shares in all, out of which, Basil has announced himself as
the trustee of 5% of the shares of the company without any further documentation of the

shares, which proves that all the three certainty requirements for the formation of express
trust are not clear. The intention for creation of trust is not clear and certainty of property of
trust and purpose of beneficiary for certainty of creation of trust is also not clear. Out of 1000
shares, Basil declared himself as the trustee for 5% i.e. 50 shares but the purpose has not been
mentioned by Basil. Furthermore, Basil has not provided documentation of 50 shares of trust.
So, such a trust could not be considered as an enforceable or valid trust because of non-
satisfaction of certainty requirements.
Task 2
Research Question - Is the Company liable to pay the fees of architect appointed by Tina
being one of the board members?
Relevant Law - The common law applicable in the jurisdiction of Australia includes the
broader concept of ‘agent’ under which, agent is considered as a person with an authority to
affect legal relations amongst principle and third parties (Fox Williams , 2019).
The directors are agents for a company and keep functioning through human agents who are
known as the directors. Though, being the agents, directors cannot be held personally liable
for the actions taken by them unless they contravene the provisions related to Act (Agrawal,
2019). The performances and intentions of its agents are considered like the performances
and intention of the corporate body. The company could be held responsible for the
malevolence contended by its directors. In Statewide Tobacco Services Ltd v. Morley (1990)
8 ACLC 827, it was considered that it is the failure on part of the director or directors who fail
to monitor financial progress of the company because of expectations that debts will be paid
by the company whenever due (Fisse, 2019). The directors are not considered as the agents of
members of the company, but their position is superior to the ordinary agents. The directors

cannot only derive their authority from the principle, which is the company, they can also get
their authority from the act itself. Such an authority cannot be superseded.
The principals of a corporation are the owners and investors of the company while the agents
of the company are the board of directors, officers or any other person authorized by the
corporation to act on its behalf. In some of the cases, the principals and agents are considered
as same persons for a corporation. The directors are considered as agents of the corporation.
They are responsible for the management of overall operations of corporation. The authority
vested in the directors make them able to represent the corporate while dealing with third
parties, which include entering in contracts on behalf of the corporation.
Research Methodology - For the research purpose, relevant case law examples and relevant
data will be obtained from the online sources in order to address the issue.
Analysis - Tina and Susie formed a company and became the board of directors for the
company along with their nominee. As Tina is a responsible board of director in the
corporation, she has the authority to employ a firm of architects in order to design plans for
the land. The bill was issued by the architect firm, but, it remained to be pending. The
company was sued by the architects for non-payment of the fees for the work done by them.
Tina has the authority to take operational decisions for the company under which, she
employed architects for the designing of plans for land. In this context, the company is the
principal and board of directors is the agents for the company who can take decisions on
behalf of the company. In addition to it, Tina is one of the owners of the company as well, so
she has the right to take decisions as she has been responsible for the development of land.
The company must have to pay the bills issued by the architect company for the work done
by them for the company. So, the company can be held liable if any bills are not being paid
by the company on the operational acts done by the directors.
References

Agrawal, M. (2019). Role of Directors as Agents, Trustees and Managing Partners.
Retrieved May 28, 2019, from
http://www.yourarticlelibrary.com/company/director/role-of-directors-as-agents-
trustees-and-managing-partners/74222
Austlii. (2014). Case notes. Retrieved May 28, 2019, from
http://www5.austlii.edu.au/au/journals/MelbULawRw/1984/8.pdf
Cambridge University Press . (2018). Equity and Trusts in Australia. Retrieved May 28,
2019, from https://www.cambridge.org/core/books/equity-and-trusts-in-australia/
creating-an-express-trust/F6047F07426328FDDD983725A219346C
Fisse, B. (2019). Fraud and the Liability of Company Directors. Retrieved from aic.gov.au:
https://aic.gov.au/sites/default/files/publications/proceedings/downloads/10-fisse.pdf
Fox Williams . (2019). Australia. Retrieved May 28, 2019, from
http://www.agentlaw.co.uk/site/global/Australia.html
Law Teacher. (2018). Rochefoucauld v Boustead [1898] 1 Ch. 550. Retrieved May 28, 2019,
from https://www.lawteacher.net/cases/rochefoucauld-v-boustead.php
Reuters. (2019). What’s the difference between an express trust and non-express trust?
Retrieved May 28, 2019, from https://www.findlaw.com.au/articles/5204/whats-the-
difference-between-an-express-trust-and-.aspx