Trustee Liability to Third Parties

Trusts are not corporate entities: they have no legal personality and so are capable neither of owning property in their own right nor of suing or being sued. Title to the trust property vests in the trustees, who in turn have standing to sue or to be sued in their capacity as such. Of course, this is a basic notion in trust law, yet it entails some intractable consequences for trustees contracting with third parties.

Quistclose Trusts

This chapter deals with a special type of trust, usually referred to as Quistclose trust after the House of Lords decision in Barclays Bank Ltd v Quistclose Investments Ltd. Unlike the majority of trusts discussed in this book, a Quistclose trust is not an express trust created by a settlement of property wth the intention to benefit certain objects. It is an implied trust, where the trust relationship is recognized by a court based on the facts and the intention of the concerned parties.

Trustee Exemption Clauses

The personal liability of trustees in the event of a breach of trust may be limited or excluded under a clause in the trust instrument. The validity of such a clause was confirmed by the House of Lords in Wilkins v Hogg of 1861, where Lord Westbury LC observed that ‘[a]‌ testator could define the duty of his trustees, and point out the extent of their liability, and the court could not extend their responsibility’.

Disclosure of Information to the Beneficiaries and Letters of Wishes

This chapter deals with the trustees’ duty to disclose information to the beneficiaries, which is an essential mechanism of enforcement of a proper administration of the trust.

Trustees’ Dispositive Powers and Discretionary Trusts

The traditional approach under English equity relies on the notion that the beneficiaries are ‘beneficial owners’ of the trust property. This has traditionally been the main difficulty for the reception of trusts in the jurisdictions that do not know equity, as is discussed in Chapter 14.

Trusts without Equity

The focus is intentionally on ‘jurisdictions that do not know equity’ but have statutory or judicial mechanisms to enforce trusts, either foreign trusts or home-grown arrangements. ‘Jurisdictions that do not know equity’ is a distinct concept from ‘non-trust jurisdictions’. In fact, this chapter explores the methods by which jurisdictions that do not include equity in their legal systems can recognize, enforce, and practise trusts.

The Settlor: Reserved Powers and Private Trust Companies

The development of trust law in Victorian England, which led to many of the rules of equity still in force today, followed a social and economic evolution where the typical settlors were no longer members of the landed gentry but professionals and businessmen living in the cities and settling movable wealth, mainly financial assets, rather than landed estates. A similar development is taking place in the first decades of the twenty-first century, where the typical settlors are successful business people from various areas of the world, whose background is not the Anglo-American legal system and who have often accumulated an impressive wealth by running their own business. Their families may have interests in various parts of the world and succession planning is required in order to hand over the business to the next generation.

Trustees’ Remuneration, Expenses, and Indemnity

The services of trustees in eighteenth- and nineteenth-century Britain were presumed to be gratuitous as the relationships between gentlemen should not be tainted by monetary arrangements. This rule reflected a situation where the trustee’s office was usually accepted out of a moral obligation to one’s family or close friends. The reality of professional trustees has gradually changed this approach and modern legislation has introduced a right for trustees acting in a professional capacity to be remunerated for their services.

Introduction

The English legal genius that attached an obligation of conscience to the title to property brought into being what Frederick Maitland famously described as ‘perhaps the greatest and most distinctive achievement of English lawyers’. Since their first medieval appearance as ‘uses’, trusts have established themselves as the main estate planning and wealth management arrangement of the western legal tradition. Trusts succeeded in withstanding a fatal attempt to legislate them out of existence under King Henry VIII’s Statute of Uses of 1535. They subsequently spread across five continents following the expansion of the British Empire: indeed, ‘trusts’—along with ‘trade’ and ‘tea’—were one of the ‘three Ts’ traditionally associated with British civilization.

Asset Protection Trusts

The phrase ‘asset protection trust’ is generally used to describe a set of statutory provisions intended to enhance a settlor’s ability to ringfence assets and place them beyond the reach of his or her creditors. Instances of asset protection trust legislation have been enacted in a number of offshore centres since the mid-1980s and in some US states since the late 1990s.