Commercial Law Assignment: Understanding Legal Protection Guideline

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Task: You will be assessed on the extent to which you have:

  • Answered the set question(s);
  • Been able to identify, set out and discuss relevant legal issues;
  • Justified your position by reference to use of appropriate legal sources, particularly cases and legislation where appropriate;
  • Analysed, argued or discussed as required by the task questions; and
  • Engaged in legal research and made use of relevant secondary legal sources, in particular a number of legal texts, internet sites and academic (peer reviewed) journal articles and books.

In January 2019, Priya gave birth to a baby boy named Aaru. While she was still in hospital recovering from the birth, Priya’s husband Rahul went to a large retail store called Baby’s R Us and asked a sales assistant there what would be the best baby’s cot for a new born baby. The sales assistant, William, suggested either of two cots would be suitable: the “Lullaby Wonder” or the “Sleep Sound”. He suggested that the Lullaby Wonder is quite solid, and so once assembled, it is best to be kept in that state, whereas the Sleep Sound is more portable and can be easily assembled and disassembled, suitable for using in different places.

As Privya and Rahul enjoy travelling in their car, and seeing different parts of Australia, Rahul purchased the Sleep Sound so that it could be taken on their frequent holidays, and would fit easily into their car, a Toyota Corolla. Within two months of Aaru’s birth, the family set out on their first overnight adventure with the Sleep Sound. They stay overnight in an Airbnb. While Aaru sleeps in the Sleep Sound, Priya and Rahul watch television in another room. When Priya later checks on Aaru, she is shocked to see that the Sleep Sound has collapsed, and folded, trapping Aaru inside. Aaru is crying, and they immediately take him to hospital, worried that he may be injured. Priya is also treated at the hospital for shock.

Baby’s R Us bought a large one off shipment of the Sleep Sound from Lars Aaberg, an importer who they have lost touch with. Thus, they remain unsure as to who the manufacturer of this particular cot is.

Please answer both questions:

  1. Advise Priya and Rahul what rights they may have to sue in the tort of negligence. Please refer to case law principles and statutory provisions in your answer.
  2. Advise Privya and Rahul if they can sue under Part 3-5 of the ACL. If so, who would they sue, and on what basis? Please refer to specific statutory provisions of the ACL in your answer.


Issue A: In a trust arrangement, the beneficiary holds the benefit interest while the trustee holds the legal title [1]. A trust enables a legal owner to manage property for the benefit of others who are unable or unwilling to do so. A trust is created when the property's owner designates himself as its trustee or transfers ownership to another party to serve in that capacity for the benefit of one or more beneficiaries or a charitable cause [2]. "An express trust is one that is intentionally created and that the trustee intentionally accepts." [3], this may be either private, developed for the benefit of specific individuals or classes of individuals, or public, benefiting the general public. As I examine and contrast each, I will be concentrating on express trusts and the "three certainties" required to validate a trust. Each assurance will be demonstrated independently, using examples from relevant case law to support or refute the argument that its efficacy has been adversely harmed. Yes, some cases may be detrimental to the efficacy, but the majority of cases support, enrich, and clarify the three certainties. Because each situation is unique, it should be evaluated solely in light of the relevant circumstances.

To successfully establish a trust, duties must be "administratively practicable and capable of being "policed" by the court." A trust is required to have "three certainties" [4]. They were named by Lord Langdale MR in the case Knight v. Knight [5] as certainty of intention, certainty of topic, and certainty of object. The first is the issue of whether the actions or statements made by the putative settlor amounted to a declaration of a trust over his property. The second and third conditions demand that the assets intended to constitute the trust and the beneficiaries who are its "objects" may be identified [6].

certainty of purpose

Since "equity looks to intent rather than form," intention is determined by taking into account all of the relevant facts. Instead of merely utilising words like "trust," it is essential to be confident that the settlor truly wanted to establish a trust. This protects both transferors by ensuring that their property is only used in line with their expressed intentions and transferees by ensuring that they are only subject to trust obligations when it should have been obvious to them that they were taking property as trustees. There won't be an express trust, therefore, unless the original owner clearly intended to create one or if the desire to form one was communicated with insufficient clarity to bind the recipient's conscience [7]. Since Lambe v. Eames [8], when the language is in doubt, the courts distinguish between precatory and imperative words. Precatory phrases convey a wish or a moral duty, but urgent words convey a request or a duty to act. It can be argued that case law, which distinguishes between acceptable and unacceptable terminology and establishes what is and is not appropriate, has assisted the certainty of intention. It also enables consideration of the settlors' behaviour. Critics can counter that case law is actually hurting the effectiveness. What happens if the settlor's actions result in the creation of a trust without their understanding that is the result of their actions if intent is determined by the settlor's purpose to do so? This obviously refutes the argument about specific intentions. In the case of Paul v. Constance [9], Mr. Constance's behaviour clearly indicated that he intended to sell his property so that Mrs. Paul might have a beneficial interest. In this case, it may be argued that there was a lack of intention because, despite the fact that his acts led to the development of a trust, he did not intend to do so. It may be claimed that this defeats the goal of having a clear intention, comparable to Re Kayford. [10] These kinds of situations seem to introduce a component of luck, especially when the circumstances are similar: Regarding H B Haina & Associates Inc. The validity of the three certainties is also called into doubt in the case where a trust was intended but the courts failed to recognise it (Re B (Child: Property Transfer) [12]). The difficulty in determining intention in business and family trusts is another area of ambiguity. Although S.874 Company Act 2006 [13] permits the use of trusts as a measure of protection against insolvency, Clough Mill Ltd v. Martin demonstrates that determining a purpose is simply difficult. [14]

Confidence in the subject at hand

Both the trust assets and the beneficial interests must be readily discernible. This criteria is a little vague; it could be interpreted to mean either that the trust's beneficial interests or the property subject to the trust must be certain. [15] . The trust will typically be declared void if the trust documents contain vague or generic descriptions of the assets that will confuse the courts as to what is being held on trust. As are circumstances where an effort is made to establish a trust over a portion of a larger body of physical property. When a portion of a larger bulk of tangible property is held in trust, the trust property will only be certain if it has been divided from the other portions. Palmer v. Simmonds [16] found that "the bulk" of the testatrix's inheritance, "some of my best linen," Peck v. Halsey [17], "a generous gift," Jubber v. Jubber [18], and Re Kolb's WT [19] directive to buy "blue chip" assets were all ambiguous descriptions of property to be held on trust. It could also be claimed that the surrounding case law undermines the effectiveness since it seems to have established a "life line" that increases the apparent scope of the subject matter's certainty. According to the argument made in Hunter v. Moss [20], the trust was invalid because the shares were not divided up or designated. However, Dillon J distinguished from Re London Wine Co [21] on the grounds that, unlike cases of wine or other tangible property, these shares were indistinguishable from one another and therefore no trust was established because the wine ordered by customers had not been separated from the general stock and therefore the subject matter of each could not be identified. As owning any 50 of the 950 shares on trust would accomplish the same effect, segregation was not necessary. Hayton [23] questioned whether Dillon J's argument that there is no difference between a testator giving 50 shares to a legatee in his will and a settlor declaring himself trustee of 50 of his shares is correct and whether there is a broad and convincing distinction between trust of unascertained bulks of tangible and intangible property [24]. Hunter v. Moss was followed in Re Harvard Securities [22], but Hayton [23] questioned whether this is the case. Although there may be no conceptual or evidential uncertainty regarding the actual property being held on trust, what happens to the trust when the whereabouts of the property cannot be traced? Does the trust fail on that uncertainty? This is another area that may argue why surrounding case law has had a detrimental effect on the efficacy of the certainties. No trust ever breaks because the location of the asset or object is now unknown, as proven in Brown v. Gould, seems to be the answer. [26] Equity is all about justice, so it may be questioned whether it goes too far to claim someone is entitled to something if it is never found. In conclusion, even identical tangible property may require segregation; case law changed the requirement that intangible property, such as shares, be segregated, acting to the cost of certainty.

the certainty of things (beneficiaries)

The identity of the beneficiaries is related to this certainty. Every trust, with the exception of charitable trusts, must pass the certainty of objects test, and for fixed trusts and discretionary trusts, the test is different. Due to the need for determinable beneficiaries to enforce the trust obligation, it may be claimed that this certainty is the most troublesome. A fixed trust is one in which the beneficial interests are fixed; regular express trusts fall under this category. A discretionary trust, on the other hand, is a "kind of trust in which the trustees are granted the right to appoint people as the trust's beneficiaries." Before trustees use their discretion to appoint in their favour, the class of potential beneficiaries does not own any beneficial interest; the trustees' discretion governs how much money they will receive. [27] . A comprehensive list of the beneficiaries must be compiled in order to meet the certainty of objects criterion for a fixed trust. The "full list" test and the "is/is not" test have been developed to aid the courts. Only fixed trusts where it is possible to compile a list of beneficiaries from a definite class are subject to the complete list test. In IRC v. Broadway Cottages Trust [28], it was argued that the court used the incorrect standard because it typically only applies to fixed trusts [29]. Because it applies to all trusts, the is/is not test is more difficult. Is it feasible to determine with confidence if a specific person falls within the class or not? Powers of appointment [31] and discretionary trusts [30] are both subject to this test. Re Baden's Deed Trusts (No 2) [32] has used three alternative ways to the examination. According to Megaw LJ's test-taking strategy, as long as you could claim with sufficient certainty that a sizable proportion of persons belonged to the class, the trust would be sufficient. Although similar, Sachs LJ's strategy was that the burden of proof fell on the claimant to show that he is a member of the class; there had to be conceptual certainty. Due to Stamp LJ's considerably tighter criterion, the size of the class had to be known from the beginning; if any individuals were unsure, the trust would not be sufficiently definite and would be null and void. It is hotly contested whether strategy is best because each one, depending on the evidence, helps to obtain a just judgement. If the class of beneficiaries specified in the trust agreement is administratively impracticable, as was the situation in R v. District Auditor [33] or is "hopelessly vast," as was the case in McPhail [34], the trust will be declared invalid. The various ways that can be used when applying the is/is not test, despite being a difficult area of law, help the effectiveness of the certainty of objects since they have extended the scope to be more applicable to a wide range of case scenarios.

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