LAWS2201 Study Guide - Final Guide: Insurance Fraud, Liability Insurance, Unsecured Creditor
2 Jul 2018
School
Department
Course
COMPANY
-s.126, agents with (express or implied) authority of a company can contract on
behalf of the company. Acts of a company are its acts, not the act of its member -
directors are merely agents of the company
-corporate veil shields the members and directors from liability to outsiders –
owner/shareholders are not personally responsible for debts and obligations of the
company. A company is a separately legal entity- can sue and be sued s.124(1) - it
separate the directors from the company. Salomon v Salomon & Co Ltd
-s.124(2) an act that is not in best interest of the company does not impact the
company’s capacity to do that act.
Assumptions
-ss 128, 129
-Holding out - its about whether in the eyes of the 3rd party, it is implied that the X
was held out to have authority (ie X implied actual authority) to hold the Y to have
authority, don’t care if X did not have authority to hold Y (remember that the
holding out must come from someone with actual authority) – Brick Pipe Industries
Ltd & Occidental Life Nominees Pty Ltd
-Panorama Developments (Guildford) Ltd v Fidelis Furnishings Fabrics Ltd – No
actual authority but he has apparent authority to do bc they are the usual or
implied authority enjoyed by company secretaries
Duties of Directors
-s 180 - Australian Securities and Investments Commission v Healey – failed to take
reasonable steps to be familiar enough with current accounting standards. Placing
reliance solely on other, no matter how competent is not sufficient and
ignorance/honesty are a not defence under s.180.
-s 181 - Australian Securities and Investments Commission v Adler - Adler –
contravention of each of ss 180-183
-s182 - Use of position - Cummings and anor v Claremont Petroleum NL – use of
their positions as directors to gain benefit for themselves
-s 183 - Use of information - Australian Securities and Investments Commission v
Vizard
-s 184 - imprisonment for up to five years and/or fines of up to $220,000.
-s 588H - Defences - Reasonably relied on competent person’s information that led to
the a reasonable belief that the company is solvent. Negligent as director to keep up
with work? Hire someone?
When to lifting the Corporate Veil – ie personally liable
1. Fraud or improper conduct by sham company. Gilford Motor Co Ltd v Horne
2. When a company is acting as an agent, the court has ignored the corporate veil
(particularly when the veil is between subsidiary and parent company). Smith,
Stone & Knight v Birmingham Corporation- Court wont allow corporate veil to
protect the principal/parent company
3. Breach of their duty
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TRUST
-A settlor creates a trust and binds the trustee to deal with the trust property for the
benefit of the beneficiaries. The settlor transfers legal title of the trust property to
the trustee ie trustee is now the legal titleholder of property
-Trustee cannot be the sole beneficiary
-split between legal and equitable ownership i.e. the property is in the name of
someone else
-Express Trust - there is a clear "intent" that property the trustee holds should be
held on trust for the benefit of beneficiary.
-Implied Trust - law presumes in the circumstances that the settlor had an intention
to create a trust, despite intention is not expressed.
-Three situations where Implied Trust arises:
1. Implied Actual Intent
-It is implied by circumstances, but those circumstances show a definite intent,
that the settlor intended that someone other than the trustee to have the
beneficial interest
2. Gratuitous provision of a substantial piece of property
-There is a presumption that the stranger holds the property, as a trustee, for the
benefit of the settlor – unless circumstances indicate otherwise ie gift giver can
prove he really intended the gift to be a gift: Calverley v Green - settlor transfers
legal title to property to a stranger without receiving any consideration.
-If its a father and son, its not a trust bc presumption that it was intended to be a
gift
3. Resulting Trusts
-transfer of the property interest has failed, there is a presumption that the settlor
would have intended that title to the property revert back to the him and don't
intend for the trust to keep going.
-A failed expressed trust becomes a resulting trust, eg, because its objects are
uncertain, beneficiary dies before the testator. Barclay's Bank Ltd v Quistclose
Investments Ltd
Types of trusts
1. Constructive trusts
-The principle operation of CT has been in the area of breach of fiduciary duty.
Chan v Zacharia
-comes into existence by operation of law and not by intention (express or implied) -
something has gone wrong and law constructs a trust around the problem to
remedy that problem
-occurs when the relationship is presumed would continue and one party which
holds the full legal title to property, unconscionably ignores contribution of the other
party and claims the full beneficial interest.
-Baumgartner v Baumgartner - inequitable for the husband to retain the whole
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property for his own benefit where the wife contributed 45% of income pooling
2. Discretionary Trusts
-Can be an express trust - expressly stated that the trustee has a discretion as to
who, in the designated class of beneficiaries, is to receive any benefit and the
amount to be paid.
-All trustees have to agree as to how they're gonna distribute it. Tempest v Lord
Camoys
3. Trading Trusts
-The trustee is often a limited liability private company and the trust property
consists of an ongoing business
-business involves risk taking but purpose of trust is to preserve property or to
protect the business for the benefit of the beneficiary – which it is if it’s a trading
trust bc of corporate veil (Salomon v Salomon) - the company’s asset is separate
from the trust’s assets ie trust asset is protected. So while the trust sets up the
company, the company has its own assets and so the trust is making money
-will generally be a discretionary trust which ensures income splitting and ownership
of assets
-Creditor have no direct claim against trust property/beneficiaries/settlor (unless
they have given a personal guarantee) - can only claim from trustee but from own
pocket - trustee can claim to be reimbursed for trust property
-Trustee company has a personal right to indemnity from trust assets for all
liabilities incurred
4. Unit trust – like a fix trust
5. Testamentary Trusts - a testator/settlor may leave property to be held in trust which
takes effect only after death of settlor (by will). May never come into existence if
beneficiaries die before settlor
6. Charitable Trusts. Commissioner for Special Purposes of Income Tax v Pemsel
-‘Charity’ in its legal sense comprises four principle divisions:
1. trust for the relief of poverty;
2. trusts for the advancement of education;
3. trust for the advancement of religion; and
4. trusts for other purposes beneficial to the community,
-Not charitable trust unless it falls within one of these categories ^^ AND also must
be for public benefit
-money can go towards a cause, does not necessarily have to go to a person - bc
its the general attorney’s job to bring it to court and have it administered
Creation of an expressed trust
-Express trust which disposes of land, or an interest in land, must be in writing:
Wratten v Hunter
-An express trust can be created either:
- By transfer of ownership of property from settlor to trustee to hold on trust
for beneficiary
- By declaration of trust by the settlor under which the settlor declares
themselves to hold the property of trust for the beneficiary
-There’s requirements for creation of expressed trust but NOT for implied and
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