Whether adequate certainty is there in context of the trust creation as declaration made by Basil in whom he considered himself as trustee of the 5% shares of the issued share capital of Basil Electrical Co Pty Ltd?
Generally, there are two types of trusts that are express trust and non-express trust. It must be noted that, although there are two types of trust but three features are common in both type of trust:
Express trust is considered as that trust in which trust is created by the settlor and settlor declared himself or herself as the trustee of their own property, or settlor can handover the said property to any other trustee. Thus trust is mainly established in terms of the settlor intention, and in this Court also possessed power to interfere in the intention of the settlor. In case court is satisfied that the parties want to create the equitable interest in the third party.
In other words, express trust is considered as that trust which is expressly stated by the settlor and this trust is regulated by the 3 certainties that are intention, subject matter and the object. Equity maxim ‘certum est quod certum redid potest’ regulates this type of trust which means ‘that is certain which can be made certain’, because it gives effect to the expressed intention (Find law, n.d.).
Express trust is the classic core trust under which trust is created by the parties in context of all the requirements. Following are the three necessary certainties which must be present for the creation of the express trust (Find law, n.d.):
Certainty of intention- first and the most important requirement is the certainty of intention, which means it must be clear that settlor is intended to create the trust, and this intention is opposed to other entitlement. It must be noted that, while determining the intention of the parties, the question deals with the substance and not with the form. In other words, Court considers the conduct of the person and not the words of the person (Cambridge, n.d.). Equity only enforce the trust in the situation when intention of the person was clear. Court further stated that words can be sufficient for determining the intention but in case words contrary the conduct of the party then it was considered that proof of intent may be lacking. It must be noted that, while determining the intention of the parties, the question deals with the substance and not with the form. In other words, Court considers the conduct of the person and not the words of the person.
Certainty of subject matter- for this purpose there must be certainty in context of the subject matter of the trust, which means property related to the trust must be known and identified.
Certainty of objects- third and last requirement which must be satisfied is the, beneficiaries in lieu of the trust must be known and identified (Uni study guides, n.d.).
In the present case, declaration is made by the Basil in which he declared himself as the trustee of the 5% of the issued share capital of Basil Electrical Co Pty Ltd. Almost 1000 shares were there in the company. Later, it is found that there is no identification of the 50 shares held on the trust.
As stated above, express trust is considered as that trust which is expressly defined by the settlor and this trust is governed by the three certainties that are intention, subject matter and the object. In the present case also, it is necessary for Basil to prove that in this case all the three certainties are present which means this trust is the express trust. All three requirements are evaluated on the basis of present case law:
First and the most important requirement is the certainty of intention, which means it must be clear that settlor is intended to create the trust, and this intention is opposed to other entitlement. In case law Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC, in which Court stated that equity only enforce the trust in the situation when intention of the person was clear. Court further stated that words can be sufficient for determining the intention but in case words contrary the conduct of the party then it was considered that proof of intent may be lacking. It must be noted that, while determining the intention of the parties, the question deals with the substance and not with the form. In other words, Court considers the conduct of the person and not the words of the person (Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178). In this case, conduct of the Basil does not match with the words, as there is no identification of the 50 shares held on the trust. Therefore, it can be said that this requirement of the parties does not match and there is no certainty of intentions.
Certainty of subject matter- for this purpose there must be certainty in context of the subject matter of the trust, which means property related to the trust must be known and identified.
Certainty of objects- third and last requirement which must be satisfied is the, beneficiaries in lieu of the trust must be known and identified.
After considering the above facts, it can be said that there is no express trust in this case because certainty of intention is not present in this case because conduct of the Basil does not match with the words, as there is no identification of the 50 shares held on the trust.
The most important key to consider whether principle is liable for the actions of the agent is to determine the authority of the agent. In other words, whether agent has the authority to deal determines the liability of the principle. It must be noted that, for being liable agent must be authorized by the principle in some manner for the purpose of acting on his behalf, and such authorization must be communicated to the third party. Following are the three types of authority which are given by the principle to the agent under the agency law:
Express authority- an agent will have the express authority to bind the principle with its action, if such principle takes any step to provide such authority such as principle sign any contract to provide the authority to the agent. Authority can be considered as an express authority:
It must be noted that scope of the agent authority depends on the documents which is used for granting the authority to the agent. Express authority is generally easy to prove because documents can be presented in context of this as evidence (Lexisweb, n.d.).
Implied authority- there are number of times, when role played by agent required implied authority from the principle for the purpose of conducted some particular actions and activities. As stated, this authority is mainly provided to those agents who are engaged in the administrative, managerial or financial positions. In these situations, it is assumed by the Court that agent have right and power to perform these activities because these activities are important for the effective performance and discharge of the functions. The main question of fact in this type of authority is what actions are reasonably necessary and this question is answered on the basis of case (Joyce, n.d.).
Ostensible authority- it is very difficult to define this type of authority, and in context of layman terms, ostensible authority refers to those situations in which reasonable third party assumes that the agent has the authority to act in these particular situations. This can be understood through example, agent possess the right to sign the contract on behalf of the principle. This can also be happen even though no express authority to act was given to the agent, but reasonable assumption is created in the mind of the third party (Story v Advance Bank Australia Ltd (1993) 31 NSWLR 772). At the first sight, this rule is considered as the broad legal principle which also possesses the power to rectify the behavior of the employee in context of their breach of the express and implied authority. This approach is not applicable in this context, because this legal principle is restricted by the concept of the reasonableness. Therefore, it is not possible for the third party to depend on the doctrine of ostensible authority in situations when they had no basis upon which they can assume that they were contracting with such party who possessed either express or implied authority. This principle provides great protection to those people who all are engaged in the repetitive dealings with the employees of the company (Legal vision, 2016).
In the present case, company is formed by the Tina and Susie for developing the land, and the board of directors of the company includes Tina and Susie, and a nominee of each. The responsibility in context of the development of the land was provided to the Tina, and this is informed to the board of directors of the company. Tina is acted as the managing director, but she is never appointed in formal manner to this position. Later, for developing the land and for creating the design of land, a firm of architecture is appointed by the Tina, firm issue bill to the company but company fails to pay this bill. Architect sues the company for making the payments of the bill.
It is very difficult to define this type of authority, and in context of layman terms, ostensible authority refers to those situations in which reasonable third party assumes that the agent has the authority to act in these particular situations. This can be understood through example, agent possess the right to sign the contract on behalf of the principle. This can also be happen even though no express authority to act was given to the agent, but reasonable assumption is created in the mind of the third party (Story v Advance Bank Australia Ltd (1993) 31 NSWLR 772). In the present case, Tina acted as managing director in the front of the architects and there is ostensible authority, as this authority refers to those situations in which reasonable third party assumes that the agent has the authority to act in these particular situations. Therefore, company is liable to make payment of the bills.
Conclusion:
There is ostensible authority on part of the Tina, and as per this company is liable to make payment to the architect firm.
References:
Legal Vision, (2016). Can an Employee’s Actions Bind the Company?. Available at: https://legalvision.com.au/can-an-employee-bind-the-company/. Accessed on 30th May 2018.
Joyce, M. Actual and apparent authority: don’t run the risk. Available at: https://acapmag.com.au/home/2016/06/actual-apparent-authority-dont-run-risk/. Accessed on 30th May 2018.
Lexisweb. Overview — Agency. Available at: https://lexisweb.lexisnexis.com.au/Practical-Guidance-Topic.aspx?tid=1804. Accessed on 30th May 2018.
Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC.
Story v Advance Bank Australia Ltd (1993) 31 NSWLR 772.
Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178.
Find Law. What’s the difference between an express trust and non-express trust?. Available at: https://www.findlaw.com.au/articles/5204/whats-the-difference-between-an-express-trust-and-.aspx. Accessed on 30th May 2018.
Uni study guides. Express Trusts. Available at: https://www.unistudyguides.com/wiki/Express_Trusts. Accessed on 30th May 2018.
Insall, H. The classification of express and non-express trusts. Available at: https://www.findlawaustralia.com.au/articles/173/the-classification-of-express-and-non-express-trus.aspx. Accessed on 30th May 2018.
Cambridge. 15 – Creating an Express Trust. Available at: https://www.cambridge.org/core/books/equity-and-trusts-in-australia/creating-an-express-trust/48D0A5639C35F7B5A75AB6AFC84765E1. Accessed on 30th May 2018.
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