This page intentionally left blank Trusts Law With its unique contextual emphasis and authoritative commentary, Trusts Law: Text and Materials is a book that no serious undergraduate on trust courses can afford to be without The book is divided into four main parts: trusts and the preservation of family wealth; trusts and family breakdown; trusts and commerce; and trusts and nonprofit activity Within each of these parts, leading cases, statutes, and historical and research materials are placed alongside the narrative of the author’s text to give emphasis both to general theories of trust concepts and to the practical operation of trusts Attention is also given to important themes such as the developing relationship between trusts law and other areas of private law, particularly the law of restitution, and the trend towards greater integration between Equity and the common law This new edition takes account of all relevant judicial and legislative developments since the third edition and incorporates discussion of current law reform proposals such as those relating to the law of charity It also expands discussion of key themes in current developments of the law especially those relating to (i) the tensions between Trusts Law and the Law of Restitution and (ii) the consequences of the still extant division between common law and Equity Graham Moffat is Senior Lecturer in Law at Warwick University, and teaches Trusts Law, Equity and Law of Labour Relations at undergraduate and postgraduate level He has published widely on trusts law and charity law The Law in Context Series Editors: William Twining (University College London) and Christopher McCrudden (Lincoln College, Oxford) Since 1970 the Law in Context series has been in the forefront of the movement to broaden the study of law It has been a vehicle for the publication of innovative scholarly books that treat law and legal phenomena critically in their social, political and economic contexts from a variety of perspectives The series particularly aims to publish scholarly legal writing that brings fresh perspectives to bear on new and existing areas of law taught in universities A contextual approach involves treating legal subjects broadly, using materials from other social sciences, and from any other discipline that helps to explain the operation in practice of the subject under discussion It is hoped that this orientation is at once more stimulating and more realistic than the bare exposition of legal rules The series includes original books that have a different emphasis from traditional legal textbooks, while maintaining the same high standards of scholarship They are written primarily for undergraduate and graduate students of law and of other disciplines, but most also appeal to a wider readership In the past, most books in the series have focused on English law, but recent publications include books on European law, globalisation, transnational legal processes, and comparative law Books in the Series Anderson, Schum & Twining: Analysis of Evidence Ashworth: Sentencing and Criminal Justice Barton & Douglas: Law and Parenthood Bell: French Legal Cultures Bercusson: European Labour Law Birkinshaw: European Public Law Birkinshaw: Freedom of Information: The Law, the Practice and the Ideal Cane: Atiyah’s Accidents, Compensation and the Law Clarke & Kohler: Property Law: Commentary and Materials Collins: The Law of Contract Davies: Perspectives on Labour Law de Sousa Santos: Toward a New Legal Common Sense Diduck: Law’s Families and Others: Nationality and Immigration Law Elworthy & Holder: Environmental Protection: Text and Materials Fortin: Children’s Rights and the Developing Law Glover Thomas: Reconstructing Mental Health Law and Policy Gobert & Punch: Rethinking Corporate Crime Harlow & Rawlings: Law and Administration: Text and Materials Harris: An Introduction to Law Harris: Remedies, Contract and Tort Harvey: Seeking Asylum in the UK: Problems and Prospects Hervey & McHale: Health Law and the European Union Lacey & Wells: Reconstructing Criminal Law Lewis: Choice and the Legal Order: Rising above Politics Likosky: Transnational Legal Processes Maughan & Webb: Lawyering Skills and the Legal Process Moffat: Trusts Law: Text and Materials Norrie: Crime, Reason and History O’Dair: Legal Ethics Oliver: Common Values and the Public-Private Divide Oliver & Drewry: The Law and Parliament Picciotto: International Business Taxation Reed: Internet Law: Text and Materials Richardson: Law, Process and Custody Roberts & Palmer: Dispute Processes: ADR and the Primary Forms of Decision-Making Scott & Black: Cranston’s Consumers and the Law Seneviratne: Ombudsmen: Public Services and Administrative Justice Stapleton: Product Liability Turpin: British Government and the Constitution: Text, Cases and Materials Twining: Globalisation and Legal Theory Twining & Miers: How to Things with Rules Twining: Rethinking Evidence Ward: A Critical Introduction to European Law Ward: Shakespeare and Legal Imagination Zander: Cases and Materials on the English Legal System Zander: The Law-Making Process Trusts Law Text and Materials Fourth edition Graham Moffat Senior Lecturer in Law, University of Warwick With Dr Gerry Bean Partner in Phillips Fox, Melbourne Victoria and Professor John Dewar Pro-Vice Chancellor of Griffith University, Brisbane Queensland cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge cb2 2ru, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521674669 © Graham Moffat 2005 This publication is in copyright Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published in print format 2005 isbn-13 isbn-10 978-0-511-14611-4 eBook (EBL) 0-511-14611-6 eBook (EBL) isbn-13 isbn-10 978-0-521-67466-9 paperback 0-521-67466-2 paperback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate Contents Preface Acknowledgments Table of abbreviations Useful websites Table of statutes Table of statutory instruments Table of cases Trusts introduced 10 11 Introduction The nature of a trust in English law The trust’s versatility Manipulating facets of ownership through trusts (a) The trust’s ‘tricks’ (b) Summary Equity’s rules for enforcing trusts and supplementing their terms When is a trust not a trust? The trust and ‘competing’ legal institutions (a) Trust and contract (b) Trusteeship and ‘personal representation’ (c) Trust and company Internationalising the trust Imputed trusts Marking the boundaries Focus on social contexts where trusts are used page xviii xxi xxii xxiii xxiv xxxi xxxii 1 5 11 12 14 15 16 17 18 20 21 27 31 The evolution of the private express trust 33 Introduction Medieval ‘uses’ of land The Statue of Uses 33 34 39 vii viii Contents 4 The emergence of the modern trust (a) The causes of change (b) The changes in trusts law and practice Strict settlements of land and married women’s property rights (a) Strict settlements (b) Strict settlements and trusts (c) Trusts for married women The role of trusts in English law The jurisdiction of equity (a) Equity and the common law (b) The Judicature Acts 1873 and 1875 (c) Law and Equity: fusion or harmonisation? 42 42 45 48 48 50 51 54 61 61 62 63 Taxation, wealth-holding and the private trust 69 Introduction Trust motivation and tax avoidance (a) Trust founder’s motives (b) Tax avoidance, tax evasion and creatures of a similar hue (c) Trusts and tax avoidance: a r´esum´e Taxes and the policies underlying them (a) Purposes of taxation (b) Principles of taxation (c) Tax structure Taxation and redistribution (a) Introduction (b) Wealth distribution and the importance of inherited wealth (c) Estate duty: a voluntary tax? Trusts and wealth concentration (a) A statistical gap: identifying the numbers and size of trusts (b) Attributing beneficial ownership in trust funds Conclusion 69 71 71 75 90 92 92 93 96 100 100 101 103 104 104 106 108 Creating the Trust – I 112 Introduction (a) The centrality of intention (b) Maxims of equity and trust creation Creating a trust: the requirements outlined (a) Capacity to create a trust (b) The ‘three certainties’ must be present (c) The necessary formalities must be observed 112 112 114 115 116 116 117 1036 The regulation of charities structures Thus organisations with a large and active membership such as the National Trust may need to be differentiated from those which are more specifically dedicated to delivery of services, whilst both are very different from that epitome of individual philanthropy, the charitable foundation The National Trust was one of several organisations with large memberships that became a site for conflict between competing views over, inter alia, animal rights issues, particularly stag hunting and fox hunting (see Lansley (1996) 7(3) Voluntas 221–240) Another such organisation was the RSPCA where the conflict took the form of a dispute about the membership rules, in particular whether the Society had the power to exclude from membership those people whose membership the Society believed would be damaging to its interests The court upheld the Society’s right to this provided it was acting in good faith in the best interests of the Society, although on those grounds it disapproved the particular method of refusing applications and/or removing members (RSPCA v Attorney-General [2001] All ER 530) It would be inappropriate to end a chapter, one of whose key actors is the Charity Commission, with the focus on the decision-making of the High Court The Commission has a key procedural role to play even there in that proceedings such as those in the RSPCA case are charity proceedings under the Charities Act 1993, s 33(8) and therefore require its consent Moreover, the role of the Commission can be more extensive than this in certain situations of membership conflict Whilst it is the case that the Commission cannot act in the administration of a charity where the trustees have acted within the scope of their powers and duties and in good faith, it does have the authority to intervene where, for instance, the administration of the charity has broken down to such an extent that the charity is not working effectively or where there is a clear danger of the name of the charity being brought into disrepute (see eg Charity Commission RS7 Membership Charities (March 2004)) Then the Commission can have recourse to the various stratagems described in this chapter such as opening an Inquiry under s of the Act, or making an Order under s 26 or even providing a scheme setting out new governance provisions Index accounts account for profits, 846 agents’ fiduciary duties, 788 beneficiaries’ remedies, 547–549 charities SORP, 1015 supervision, 1014 duty to keep, 533–534 accumulation and maintenance trusts favourable IHT treatment, 390–392 income tax, 361 inheritance tax, 385–392 meaning, 386–390 powers of maintenance, 347 acquiescence, 568 advancement See powers of advancement See also resulting trusts and presumption of advancement advertising, charities, 1028–1030 agents, fiduciary duties, 788 agricultural property relief, 370, 395 Anton Piller orders, 687, 752–755; See also ‘search orders’ appointment See powers of appointment apportionment, impartiality, 487–488, 491–494 art galleries, 932 assignment, 126–127 Association of Corporate Trustees, 409 associations See unincorporated associations Australia charitable purposes, 928 family property, 629–633, 641–642 trading trusts, 19 unconscionability, 26, 629–633, 850 bankruptcy See insolvency bare trusts, 415 Beddoes orders, 681 beneficial interests certainty, 170–171 discretionary trusts, 238–239 beneficiaries access to information, 533–542 and appointment of new trustees, 519–520 certainty See certainty of objects dealings with trustees, 435–440 death, 209 disclosure rights, 534–542 income tax, 362 interests, 235–242 debate, 235–238 discretionary trusts, 239–240 equity, 241–242 nature, 235–242 ownership rights, 14 remuneration of trustees, 426–427 beneficiary principle boundaries, 246–252 charitable trusts, 242 generally, 196, 197, 242 offshore trusts, 252–253 origins, 243–246 sidestepping, 252–253 and unincorporated associations, 854 benefits, meaning, 327–333 Bermuda, 252 black hole trusts, 232–233, 241 bona vacantia, 129, 868–870 bonds, breach of confidence and fiduciary relationship, 817–818 law reform, 818 and privacy rights, 818 trustees, 13 breach of trust classification, 547–550 dishonesty, 730–731 trustee liability See trustee liability bribes, 846–849 Brussels Convention on jurisdiction, 237 business See commerce business property relief, 370, 395 Canada Charter of Human Rights, 629 family property, 626–629 fiduciary relationship, 805–806, 850 insolvency law reform, 271, 277–278 1037 1038 Index Canada (cont.) perpetuities, 302, 306 remedial constructive trusts, 811 taxation, 110 trusts and creditors, 275 unjust enrichment, 26, 626–629 variation of trusts, 337 capacity, creation of trusts, 116 capital advancement See powers of advancement and income, 51, 97–98, 488–491, 495–497 investment impartiality, 488–491, 495–497 taxation, 98 capital gains tax charitable gifts, 919 charities, 918 creation of trusts, 367 deemed disposals, 367–368 disposals by trustees, 367 generally, 365–368 holdover relief, 365, 395 purpose, 98, 365 trusts, 366–368 capital transfer tax effect, 105 history, 369–371 and IHT, 374–375 introduction, 99, 104 caretaker trusts, 73, 74 causation, trustee liability, 550–552 certainty beneficial interests, 170–171 and commerce, 29 covenants to settle, 173–175 creation of trusts, 116–117 declarations of trusts, 157–160 future property, 168–170 and imputed trusts, 810 intention of secret trusts, 160–165 intention to create trusts, 154–165 objects See certainty of objects precatory words, 155–157 subject-matter, 116, 165–171 tax principle, 94–95 trust property, 806 wording, 116 certainty of objects or accountability and control, 233–235, 241 administrative workability, 226–230, 232, 249 bequests to associations, 854 black hole trusts, 232–233, 241 change, 231–232 charitable trusts, 903–904 discretionary trusts, 205–210 duty to survey, 226 fixed trusts, 220–221 Gulbenkian, 210–213 legal development, 198, 205–235 McPhail v Doulton, 213–220, 231–232, 235 Re Baden, 221–225 requirement, 116, 196–197, 203 Chancery Court, 12–13, 37–39, 41–42 charitable purposes amateur sport, 927, 961, 964 animal welfare, 927, 959 categories, 880, 935–964 Charities Bill 2004, 493, 927–929, 952 citizenship, 927, 957–958 community development, 927, 957–958, 961 conflict resolution, 927, 961 culture and science, 927, 939–944 education, 927, 928, 929, 939–944 environmental protection, 927, 958 hardship relief, 927, 958 health promotion, 927, 957 human rights, 927, 961 law reform, 926, 930–932, 990–993 legal definition, 4, 884, 886–888, 892, 896, 990–993 and politics, 981 miscellaneous purposes, 951–956, 973–975 popular and legal meaning, 880–881 poverty relief, 927, 928, 929, 935–939, 966–967 public benefit, 887 Charities Bill 2004, 965 disasters, 973 education, 967–970 ethnic minorities, 974 generally, 965–975 law reform, 927, 929 miscellaneous purposes, 951–956, 973–975 overseas activities, 956 poverty relief, 966–967 presumption, 928 religion, 947–951, 972–973 recreation, 962–964 religion, 927, 928, 929, 944–951 social welfare, 964 charitable trusts See also charities alternative legal forms, 879–880 beneficiary principle, 242 and certainty of objects, 903–904 cy-pr`es doctrine, 906–913 deficiencies, 878–879 grant-giving trusts, 923 investment principles, 449 motivations, 878 perpetuities, 904–906 powers of trustees, sanction, 999–1000 privileges, 903–914 and public law, 881–882 trustees disqualifications, 1014 liability, 1021 monitoring, 1013 uses, 10–11, 32 Index charities 17th/18th century, 885 19th century, 885–892 20th century role, 892–896 accounts, 1014 SORP, 1015 advertising, 1028–1030 annual reports, 1016 Charities Bill 2004, 927 charity appeals, 912–913 charity proceedings, 1022 locus standi, 1022 and commerce, 975–981 fee charging, 975–978 profit, 978–980 corporate giving, 900 Deakin Report, 895, 926, 955, 985, 990, 1034 finance, 899–902, 923 fund-raising, 1024–1028 commercial participators, 1025 criminal liability, 1028 public appeals, 1027–1028 information requirements, 1017–1018 investment common investment funds, 998 principles, 468–469 role of Charity Commission, 998 law reform, 880, 925–926, 990–993 definition of charity, 990–993 management, accountability, 1012–1021, 1036 accountability, 1012 administration costs, 1012 mismanagement, 1019 Middle Ages, 877, 883 Nathan Report, 892–893, 896, 994, 1002 Official Custodian, 998 Pemsel case, 887–892, 990 privileges, 903–922 discrimination, 921–922 taxation, 914–921, 934 trust form, 903–914 withdrawal of tax privileges, 1024 purposes See charitable purposes appeals, 934–935, 1000–1001 exempt charities, 932, 1013 names, 934, 1013 powers of Commission, 1013 procedure, 932 size of charity sector, 896–899 small charities accounts, 1015 cy-pr`es, 1009 and state obligations, 937–938, 961–962 supervision, 1012–1036 accounts, 1014–1015, 1017 advertising, 1028 annual reports, 1016 fund-raising, 1024 detection of maladministration, 1014 information sources, 1017–1018 investigations, 1018–1019 limits, 1030–1036 protection of property, 1019–1021 trustee liability, 1021–1023 withdrawal of tax relief, 1024 taxation confidentiality, 1017 donor relief, 919 exemptions for charities, 916–919, 932, 1013 Gift Aid, 900, 917–918, 919 law reform, 991–992, 993 privileges, 914–921 review, 915–916 trading companies, 917–918 terminology, 896 trading competition, 921 trusts See charitable trusts Tudor period, 883–885 unincorporated associations, 879, 904 and welfare state, 892–902 Wolfenden Report, 893–894, 895 Woodfield Report, 1025 Charities Aid Foundation, 898, 916 Charity Appeal Tribunal, 1000–1001 Charity Commission 19th century, 891 administrative decisions, 931 functions, 879, 996–1001 advice, 997–998 approving trustee powers, 999–1000 cy-pr`es, 1009 investment facilitation, 998–999 property holding, 998 guidelines charitable purposes, 954–955 fund-raising, 1027 investment, 999 politics, 984 human rights obligations, 882, 946–947 legal history, 994–995 objectives, 997 powers, 997–1000 registration powers, 1013 procedure, 932 resources, 1001, 1032 statistics, 897, 898, 1021 structure, 996 supervision accounts, 1014–1017 generally, 996–1001 information sources, 1017–1018 limits, 1030–1036 children powers of maintenance, 347–353 public policy, 292 1039 1040 Index Chinese walls, 823–824, 844–845 citizenship, charitable purposes, 927, 957–958 civil law systems, and trusts, 20–21, 67 Coke, Edward, 1, 36, 62 commerce and charities, 975–981 fund-raising, 1025 and fiduciary duty, 841–843 morality, 843 and trusts, 644–645 and uncertainty, 29 use of trusts, 32, 56–57 common law, and equity, 61 community development, 927, 955, 957–958 companies charitable gifts, 900 family companies, taxation, 394 joint stock companies, 43 limited by guarantee, 879 origins, 18–19, 43 and trusts, 18–20 competition, and charities, 921 compromises, variation of trusts, 315–318 confidentiality charity taxation, 1017 fiduciary duty, 13, 817–818 and insider dealing, 835 conflict resolution, 927, 961 conflicts of interest Chinese walls, 823–824 directors, 839 and fiduciary duty, 418–420, 441, 821–826 occupational pensions, 678 ongoing relationships, 824–826 constructive trusts See also imputed trusts and bribes, 846–849 categories, 23–26, 713–717, 811 commercial remedy, 713–740 commercial scenarios, 799–800 development, 586 equity, 13, 687–688 family property Canada, 626–627 or estoppel, 26, 587, 609–615 generally, 599–623 inferred common intention and direct contributions, 615–623 Lloyds Bank v Rosset, 599–601 and fiduciary relationship, 800 institutional constructive trusts, 24–25, 811 justice and morality, 799, 800–801 meaning, 22, 585–587 remedial constructive trusts, 25–26, 30–31 fiduciary relationship, 811–816 Goldcorp Exchange, 812–817 and Quistclose trusts, 783 third parties dishonest assistance, 729–740 example, 687–688 generally, 713–740 knowing assistance, 735 knowing receipt, 717–729 knowledge requirement, 719–723 and restitution law, 726–729 unconscionability, 723–725, 812 consumer prepayments Kayford trusts, 766–768 limitations of trust remedy, 768–770 problem, 765–766 remedies, 765–770 and trusts, 765–771 contracts privity of contract, 177–178 rights of third parties, 177–178 or trusts, 16–17 conversion, impartiality, 491–493 Cork Report, 260, 261, 268–269, 271–272, 273, 278, 281, 282, 285, 763–764, 769, 770, 786–787 covenants future property, 175–177 legal policy, 178–182 to settle, 173–175 creation of trusts beneficiary principle See beneficiary principle capacity, 116 capital gains tax, 367 certainty, 116–117 certainty of intention to create, 154–165 certainty of objects See certainty of objects completion, 117, 130, 131–139 covenants to settle, 173–175 dealings in equitable interests, 118–119 declarations of trusts, 117, 120–121, 125–126, 157–160 equity principles, 114–115 formalities, 117, 118–154 fraud on creditors, 117 incomplete constitution and intentions, 171–183 intention to create, 111, 112–114, 154–184 inter vivos dispositions of equitable interests, 120–130 requirements, 115–117 resulting trusts, 184–188 secret trusts, 139–154 testamentary formalities, 139–154 unconscionability, 134–138 valuable consideration, 117 Vandervell saga, 188–195 creditors acceptance of risk, 814–815 and family trusts, 258–291 intention to defraud, 117 Index protection of settlors from, 278–291 protective trusts See protective trusts CREST, 132, 500, 506 culture and science, charitable purpose, 927, 939–944 public benefit, 967 custodians, 506–507 cy-pr`es doctrine charitable appeals, 912–913 charitable trusts, 906–913 co-ordination of activities, 1003 failure requirement, 907–910, 1001, 1004–1006 general charitable intentions, 910–912 generally, 1001 instigation of proceedings, 1009 modernisation function, 907, 1004–1008 poverty relief, 937 small charities, 1009–1011 rescue function, 907–913 types of schemes, 1002 damages equitable damages, 757–762, 849 judicial discretion, 758–760 jurisdiction, 758 quantification, 760–762 Deakin Report, 895, 926, 955, 985, 990, 1034 death duties, 368–371 debentures, 9, 452 declaration of trusts certainty of intention, 157–160 formalities, 117, 120–121, 125–126 delegation agents, 503 asset management functions, 505 custodians, 506–507 generally, 499–511 historical development, 45, 442–443, 444, 499–501, 510 individual delegation, 508–509 nominees, 506–507 pension schemes, 509, 657, 658–661 power to appoint agents, 501–505 statutory provisions, 501–511 terms of appointment, 503–505 trustee liability, 507–508 trusts of land, 509–510 derivatives, 454 determinable interests, 257–258, 262–263 directors fees, 431–434 secret profits, 836 standards of conduct, 839–840, 843 disability discrimination, 921, 922 disaster appeals, 973 disclosure rights generally, 534–542 nature of rights, 535–537 and trustees’ decision-making, 538–542 whose rights, 534–535 discretionary trusts attribution of beneficial ownership, 106–107 beneficiary’s interests, 239–240 breakthrough, 205–208 certainty of objects, 197, 213–220 emergence, 205 equitable ownership, 238–239 features, flexibility, 380 historical development, 47 inheritance tax, 375, 381–385, 397 judicial checks, 208 meaning, ownership rights, 354 powers of appointment, 202–203, 205–210, 226–230 and protective trusts, 266 statistics, 105 tax avoidance, 369, 380 tax planning, 70, 74, 90, 105 uses, 198–199 discrimination charities, 921–922 disability discrimination, 921, 922 non-discrimination principle, 983 positive discrimination, 921 race discrimination, 292–295, 922 sex discrimination, 922 dishonesty breach of trust, 730–731 dishonest assistance, 729–736, 740 and knowledge, 731–733 meaning, 733–736 distance selling, EU law, 770 dividends, income tax, 359, 361 donatio mortis causa, 151–152, 182 dynastic trusts, 73–74 education, charitable purposes, 925, 927, 928 employment and occupational pensions, 645, 651 women, 596, 607 environmental protection, charitable purpose, 927, 958 equity beneficiary’s interests, 241–242 and civil law systems, 21 and commercial law, 841 and common law, 61 Court of Chancery, 12–13, 37–39, 41–42 and creation of trusts, 114–115 equitable damages, 757–762 equitable remedies, 12–14, 685 and fraud, 115 intention over form, 114–115 jurisdiction, 61–68 non-assistance to volunteers, 182–183 1041 1042 Index equity (cont.) normative approach, 115 and origin of trusts, 33, 37–39 personal claims in equity, 709 presumption of bargain v gift, 583 estate duty, 103–105, 368–371 estoppel and constructive trusts, 26, 587, 609–615 New Zealand, 634 proprietary estoppel, 182–183, 587, 600, 609–615 ethical funds, 470 ethnic minorities, 974 EU law distance selling, 770 and voluntary sector, 993 exchange controls, 357 exporting trusts capital gains tax, 368 mobility, 356–357 variation of trusts, 333 express trusts and imputed trusts, 22, 581–582 meaning, family conciliation services, 958 family homes home sharers, 591, 592–594, 625, 639 inheritance tax, 392 and insolvency, 272 ownership models, 616 trust use, 32 family property Australia, 629–633, 641–642 Canada, 626–629 common law, 587 communality, 636–637 financial organisation, 597–599 and imputed trusts, 580, 587–595, 599–623 alternative doctrines, 635–637 modern role, 592–594 law reform, 590–591, 637–642 Lloyds Bank v Rosset, 599–601 married women’s property, 54, 55, 587–589 new directions, 623–643 New Zealand, 633 ongoing marriages, 591 quantifying shares, 607–609, 618–622 and sexual divisions, 595–599 trust use, 31 unjust enrichment, 636 unmarried couples, 592 fees, charities, 975 feminism, 53–54 feudalism, 34–36, 39, 40 fiduciary duties agents, 788 and commercial contracts, 841–843 Commonwealth jurisdictions, 850–851 confidentiality, 817–818 directors, 839–840 no conflict of interest rule, 821–826 no secret profits rule, 826–838, 844 remedies, 846–850 standard, 839–841 statutory regulation, 843–845 fiduciary relationship commercial context, 841–843 and constructive trusts, 800, 811–816 development of concept, 802–804 identification, 804–806 meaning, 801–802 model, 405–407, 800 and morality, 843 power and discretion test, 805–806 relationship or remedy, 807–811 and Romalpa clauses, 789–791 scope, 806–807 undertaking test, 804–805 and undue influence, 819–821 financial services, regulation, 843–845 fixed trusts, 220–221 floating charges, 764, 786, 796 founders See settlors fraud constructive trusts, 585 equitable remedies, 685, 686 and equity, 115 fraud on a power doctrine, 527–528 and limitation periods, 576 tracing See tracing trustee liability, 569 freedom of conscience and religion, 947, 983 freedom of disposition, 255 freedom of expression, 983 freezing orders, 687, 746–752 worldwide orders, 750–751 friendly societies, 921 FTSE4 Good Index, 470 fund-raising, charities, 1024–1028 GAYE, 919 Gift Aid, 900, 917–918, 919 gilts, 451–452 good faith, 46 Goode Report, 649, 652, 653–654, 656, 657–682, 683–684 Goodman Report, 991 Hague Trusts Convention, 20–21, 335 health charitable purpose, 927, 957 state obligations, 961 hedge funds, 454 history of trusts 17th century, 41–42 18th/19th century, 42–48 emergence of modern trust, 42–48 Index and equity, 12–14, 33, 37–39, 61–68 Middle Ages, 32, 33, 34–39 Renaissance, 39–41 role of trusts in English law, 54–61 Statute of Uses, 39–41 statutory regulation, 39–41, 47 strict settlements of land, 48–51 trusts for married women, 50–54 holdover relief, 365, 395 home sharing, reform, 591, 592–594, 625, 639 hospitals, private hospitals, 975–978, 991 housing, special housing, 958 human rights charitable purpose, 927, 961 obligations of public bodies, 946–947 and politics, 983 impartiality, investment, 449, 486–498, 664–665 imputed trusts alternative legal doctrines, 635–637 boundaries, 27–31 categories, 21–27, 582–587, 615–617 common intention trusts, 625 Commonwealth approaches, 625–635 and companies, 20 constructive trusts See constructive trusts detrimental reliance, 604–607 or estoppel, 26, 587, 609–615 examples, 11 express informal agreements, 601 and express trusts, 22, 581–582 and family breakdown, 580, 587–595, 599–623 inferred common intention and direct contributions, 615–623 intentions, 602, 616, 634, 638 Lloyds Bank v Rosset, 599–601 meaning, modern role, 592–594 new directions, 623–643 origins, 580 quantifying shares, 607–609, 618–622 resulting trusts See resulting trusts statutory reform, 637–642 terminology, 23 tracing, 16, 810 unjust enrichment alternative, 636 income, v capital, 51, 97–98, 488–491, 495–497 income tax anti-avoidance measures, 363–365 beneficiaries, 362 charitable donations, 919 charities, 916 dividends, 359, 361 generally, 359–365 Gift Aid, 900, 917–918, 919 Give as You Earn (GAYE), 919 individuals, 359–360 payroll deduction scheme, 919 savings, 359 smaller trusts, 361 trust expenses, 361–362 trustees, 360–362 trusts, 360–362 information accounts and records, 533–534 beneficiaries’ access to, 533–542 charities, 1017–1018 disclosure rights, 534–542 duty of confidentiality, 13, 817–818 inheritance tax accumulation and maintenance trusts, 385–392 associated operations, 396–397 calculation, 99 discretionary trusts, 375, 381–385, 397 historical development, 368–371 interest in possession trusts, 375–381, 397 new approach, 374–375 outline, 371–374 parity of taxation, 397 PETs, 371, 375, 392 and protective trusts, 278 rates, 371 relevant property, 381 reliefs, 921 business and agricultural property, 395 charitable legacies, 919 reservation of benefit, 372–374 tax avoidance, 395–397 timing, 392–397 transfers of value, 372 injunctions equitable remedy, 686 freezing orders, 687, 746–752 generally, 740–755 interim injunctions, 742–746 search orders, 687, 752–755 types, 740–742 insider dealing, 835 insolvency consumer prepayments, 765–771 Cork Report, 260, 261, 268–269, 271–272, 273, 278, 281, 282, 285, 763–764, 769, 770, 786–787 exempt property, 268–269 and family homes, 272 and occupational pensions, 654, 683 and offshore jurisdictions, 290–291 protective trusts See protective trusts transactions at undervalue, 280–282, 287–290 trust purposes, 8, 9–10 and trusts, 763–764 trusts and public policy, 258–261 White Paper, 261, 278 1043 1044 Index intentions certainty, 157–160 creation of trusts, 111, 112–114, 154–165 declarations of trust, 157–160 equity principle, 114–115 fraud on creditors, 117 imputed trusts, 602, 616, 634, 638 and incomplete constitution, 171–183 resulting trusts, 185, 584 secret trusts, 160–165 inter vivos gifts creation of trusts, 120–130 tax planning, 74, 90, 104 unincorporated associations, to, 855, 863, 865–866 interest in possession trusts inheritance tax, 375–381, 397 meaning, 376–381 international law Hague Trusts Convention, 20–21, 335 and trusts, 20–21 investment best interests principle, 449 charities, 1017–1018 common investment funds, 998 principles, 468–469 role of Charity Commission, 998–999 collective investments, complexity, 450 delegation, 505 ethical funds, 470 express powers, 459–462 interpretation, 459–460 generally, 448–498 impartiality, 449, 486–498 capital v income, 488–491, 495–497 conversion and apportionment, 487–488, 491–494 enforceability, 498 fair balance duty, 497–498 investment process, 491 law reform, 487–488, 494–498 pension schemes, 664–665 meaning, 460–462 non-financial criteria, 465–470 occupational pensions, 466, 657–666 prudent man standard, 449 and modern portfolio theory, 462–465, 483–486 risk, 449–450, 456–459, 462–465 small family trusts, 482–483 social investment, 465–470, 661–666 statutory regulation advice seeking, 475–477 assessment, 482–486 standard investment criteria, 473–475 Trustee Act, 470–477, 482–486, 493 Trustee Investments Act, 458–459, 480 trust history, 45 trustee liability for loss, 477–484 trustees as investors, 477–480 trustees as shareholders, 480 types, 450–456 capital growth, 453–456 high-risk, 454 inflation-proof returns, 453 no risk to capital, 451 investment trusts, 19, 453 Ireland, charitable purposes, 928 joint stock companies, 43 jurisdiction, Brussels Convention, 237 Keith Committee, 76 knowledge and constructive trusts, 719–723, 731–733 and dishonesty, 731–733 knowing assistance, 735 land charities, disposal, 999 feudalism, 34–36 income and capital, 51 strict settlements, 48–51, 509 trust holding, 8–9, 11 trusts of land, delegation, 509–510 liens, 692, 846 limitation of actions law reform, 577–578 trustee liability, 575–578 loans lenders’ protection, 771 Quistclose trusts, 772–784 Quistclose trusts and remedial constructive trusts, 783 Quistclose trusts and resulting trusts, 781–782 trust remedy, 771–784 locus standi, charity proceedings, 1022 ‘Lu-Can’, 1028 maintenance See powers of maintenance Maitland, F W, 1, 2, 4, 15, 20, 26, 31, 57, 113, 114, 117, 816, 863 Mareva injunctions, 687, 746–752; See also ‘freezing orders’ married women and feminism, 53–54 marriage settlements, 182 marriage settlements and insolvency, 279–280 Property Acts, 54, 55, 587–589 trusts for, 50–54 matrimonial property See family property Maxwell affair, 653–654, 656 Meade Report, 96, 97, 358, 359, 399 Middle Ages, 32, 33, 34–39, 877, 883 money laundering, 685, 716 Index morality, 81, 799, 800–801, 843 museums, 932 Myners Report, 651, 654, 660–661 Nathan Report, 892–893, 896, 994, 1002 National Lottery, 900–902, 923 National Trust, 1035–1036 New Zealand charitable purposes, 928 family property, 633 reasonable expectations, 633 trusts and creditors, 275 unconscionability, 26, 634 NHS trusts, 60 nominees, 6, 415, 506–507 non-domestic rates, charities, 918 non-express trusts See imputed trusts non-profit associations See unincorporated associations Nottingham, Lord Chancellor, 42 occupational pensions administration, 657–682 court proceedings, 681–682 delegation, 509, 657, 658–661 employers’ rights and duties, 670–671 financial statistics, 650–651 Goode Report, 649, 652, 653–654, 656, 657–682, 683–684 governance, 678–682 Green Paper, 645–646 and industrial relations, 645, 651 information to members, 678–679 insolvency of companies, 654, 683 internal dispute resolution, 679–680 investments, 466, 657–666 legal framework, 654–657 macro-economics, 646, 651 Maxwell affair, 653–654, 656 members’ remedies, 678–682 members’ rights, 674–677 Myners Report, 651, 654, 660–661 Occupational Pensions Advisory Service (OPAS), 680 ownership, 666–670 Pensions Ombudsman, 680 Pensions Protection Fund, 654 Pensions Regulator, 680–681 social investments, 661–666 taxation, 649 and trust law, 9, 645, 655 trustees’ duties, 671–674 UK pension structure, 646–650 winding-up schemes, 672–673 OEICs, 453–454 Office of Fair Trading, prepayments, 769–770 offshore trusts anti-avoidance provisions, 356–357 and bankruptcy, 290–291 purpose trusts, 356 and tax complexity, 400 ownership attribution of beneficial ownership in trusts, 106–108 beneficiaries, 14 equitable ownership and discretionary trusts, 238–239 manipulation, 5–12, 58–59 pension funds, 666–670 split ownership and taxation, 354 trustees, 13 OXFAM, 986 pensions occupational See occupational pensions pensions credit, 647 personal pensions, 647 SERPS, 647 stakeholder pensions, 648 state pensions, 647 structure, 646–650 Pensions Protection Fund, 654 perpetuities accumulations, 303 charitable trusts, 904–906 inalienability, 303 law reform, 302, 303–306, 905 and public policy, 301–306 rules against, 42, 302–304 personal representatives, 17–18 politics and charities, 943–944, 981–989 Charity Commission guidelines, 984–986 political parties, 921 Poor Law, 885 portfolio theory, 462–465, 483–486 poverty relief charitable purpose, 935 law reform, 927, 928 presumption, 929 public benefit, 966 cy-pr`es schemes, 937 relative and absolute poverty, 938 and state obligations, 937 powers of advancement advancement or benefit, 340–346 generally, 338–346 statutory powers, 338–340 powers of appointment classification, 201 default of appointment, 201 discretionary trusts, 202–203, 205–210, 226–230 general powers, 201 hybrid powers, 201 meaning, 199 powers v trust powers, 203–205 powers v trusts, 199–203 1045 1046 Index powers of appointment (cont.) special powers, 201 terminology, 204–205 trustees, 201 powers of attorney, 509–511 powers of maintenance application of income, 349–351 application of income after, 4, 351 destination of accumulated income, 351–352 entitlement to income, 349 generally, 347–353 statutory provisions, 347–352 precatory wording, 155–157 preference shares, 452 premature termination of trusts, 309–313 prepayment See consumer prepayments privacy rights, 818 protective trusts 1933 statutory provision, 263–265 1986 reform, 268–272 application of income, 266–268 English v American approaches, 276–278 forfeiture, 265–266 historical development, 47, 261–263 and inheritance tax, 278 offshore jurisdictions, 290–291 and public policy, 261–278 protectors, 515, 525, 545 public bodies, and human rights, 946–947 Public Guardianship Office, 412 public policy and charitable purposes, 956 children, 292 conditions precedent, 255–256 conditions subsequent, 256–257 determinable interests, 257–258, 262–263 and freedom of alienation, 256–257, 261 and freedom of disposition, 255 insolvency, 258–261 law reform, 296–301, 927, 928 limits on freedom of testation, 295, 296 overriding limitations, 254–255 and perpetuities, 301–306 protection of settlors from creditors, 278–291 and protective trusts, 261–278 race discrimination, 292–295 and religion, 950 religious discrimination, 292–295 repugnancy, 257, 262 spouses’ claims, 296 Public Trustee creation of office, 408–409 fees, 424–425, 426 investment performance, 479 office, 411–412 statistics, 409 purpose trusts, 246–252, 356 Quistclose trusts generally, 772–784 and remedial constructive trusts, 783 and resulting trusts, 781–782 race discrimination, 292–295, 922 reasonable expectations, 633, 671, 676 records, trustees, 533–534 recreation charitable purpose, 962 social welfare, 964 redistribution, taxation, 100–104 religion charitable purposes, 927, 928, 929, 944–951 discrimination, 292–295, 947 freedom of religion, 947 and public interest, 950 remedies available remedies, 546–547 beneficiaries against trustees, 546–579 breach of fiduciary duty, 846–850 breach of trust, 547–550 constructive trusteeship See constructive trusts consumer prepayments and insolvency, 765–770 equitable compensation, 549–550, 757–762, 849 equitable remedies, 685 fiduciary relationships, 807–811 injunctions, 740–755 occupational pensions, members, 678–682 proprietary remedies, 578–579 specific performance, 755–757 subrogation, 711–713 tracing See tracing remoteness of loss, trustee liability, 552–553 reservation of title commercial framework, 786–787 and equitable tracing, 784–798 limitations, 791–795 and fiduciary relationship, 789–791 mixed goods, 791–795 Romalpa clauses, 785–786, 787–795 unmixed goods, 787–791 unsecured creditors, 784–786 restitution and imputed trusts, 27–31, 188, 726–729 terminology, 30 and tracing, 706–709 resulting trusts automatic resulting trusts, 188, 583 boundaries, 27–31 categories, 22, 582–583 and commercial certainty, 810 direct financial contributions, 615 dissolution of associations, 868–872 and intentions, 185, 584 law reform, 296 Index meaning, 23, 582 presumed resulting trusts, 583 and Quistclose trusts, 781–782 and trust creation, 184–188 Romalpa clauses, 785–786, 787–795 Roman law, 35 RSPCA, 1029, 1036 sale of goods commercial framework, 786–787 prepayments, 765–771 reservation of title, 784–798 savings, income tax, 359 science, charitable purposes, 927, 939–944 public benefit, 967 search orders, 687, 752–755 secret profits rule contemporary application, 836–838 development, 827–836 origin, 826–827 statutory regulation, 844 secret trusts certainty of intentions, 160–165 formalities, 139–154 half-secret trusts, 141–144 juridical nature, 148–154 theoretical basis, 144–148 and Wills Act policy, 152–154 securities commercial framework, 786–787 Quistclose trusts, 772–784 securitisation, 454 seisin, 34, 36, 40 SERPS, 647 settlors appointment of trustees, 515 intentions, 328 creation of trusts, 111, 112–114, 154–165 protection from creditors, 278–291 tax avoidance motives, 71 terminology, sex discrimination, 922 sham trusts, 14–15 shares ordinary shares, 453 preference shares, 452 returns, 455–456 small trusts, 361, 482–483 social contexts, 31–32 Social Fund, 938 social investment, 465–470 social security benefits, 110 social welfare, 964 South Sea Bubble, 456 special housing, 958 specific performance, 755–757 spendthrift trusts, 276–278 sport, charitable purpose, 927, 960–961, 964 sport clubs, 921 spouses dispositions to defeat claims, 296 independent taxation, 110 tax planning, 91 women See married women stakeholder pensions, 648 statutory interpretation, 82–83 statutory regulation, history, 47 stereotypes, 607 strangers, constructive trustees, 713–740 Strategy Unit Report ‘charity brand’, 992 charity law reform, 926 charity management, 1012 fund-raising, 1025 registration appeals, 934 religion as charitable purpose, 951 themes, 995 strict settlements, 48–51, 509 subordination trusts, 10 subrogation, generally, 711–713 tax avoidance anti-avoidance legislation, 109–110, 111, 356–357, 363–365, 367–368, 400–401 definitions, 75–83, 92 discretionary trusts, 369, 380 dynamic trusts, 73 inheritance tax, 395–397 schemes, 83–86 settlors’ motives, 71 and tax evasion, 75–90 trust purpose, 8, 48, 61, 71–92 variation of trusts, 331–333 tax planning discretionary trusts, 205–210 inter vivos gifts, 74, 90, 104 spouses, 91 and trusts, 19, 354, 357 taxation See also specific taxes avoidance See tax avoidance capital, 98 certainty principle, 94–95 charities conditions of relief, 934 donor relief, 919 exemptions, 916–919 Gift Aid, 900, 917–918, 919 law reform, 991–992, 993 privileges, 914–921 review, 915–916 trading companies, 917–918 withdrawal of privileges, 1024 complexity, 398–402 confidentiality, 1017 creative compliance, 108–109 horizontal equity, 94 income and capital, 97–98 1047 1048 Index taxation (cont.) independent taxation, 110 and inherited wealth, 101–103 neutrality, 95–96, 358, 398 occupational pension schemes, 649 parity, 397, 398 principles, 93–96 purposes, 92–93 and redistribution, 100–104 structure, 96–100 terminology, 358 trusts complexity, 358 generally, 358–359 government consultation, 358–359 smaller trusts, 361 terminology, 358 vertical equity, 93–94 and wealth concentration, 104–108 termination of trusts historical development, 46–47 premature termination, 309–313 Saunders v Vautier rule, 309–313, 519 testamentary trusts, formalities, 139–154 third parties, constructive trustees, 713–740 tracing common law and equity, 692–696 equitable tracing, 696–702 ascertainability, 702–704 changes of position, 704–706 limitations, 702–709, 791–795 and reservation of title, 784–798 and fiduciary relationship, 809 and following, 688–689 generally, 16, 688–711 imputed trusts, 16, 810 mixing trust property backward tracing, 700 with innocent volunteers, 700 with trustees’ property, 696–700 processes, 689–692 re Hallett’s rule, 697–699 and restitution, 706–709 trustee liabilities, 578–579, 688 tracker funds, 454 trading trusts, 19 transactions at undervalue, 280–282, 287–290 trust expenses, 486–487 trust powers advancement See powers of advancement appointment See powers of appointment maintenance See powers of maintenance powers v trust powers, 203–205 terminology, 204–205 trusts v powers, 199–203 trust property certainty, 806 certainty of future property, 168–170 covenants of future property, 175–177 manipulation of ownership, 5–12 types, trustee liability acquiescence, 568 available remedies, 546–547 breach of trust, 547–550 causation, 550–552 charities, 1021–1024 court powers, 572–575 delegation, 507–508 exemption clauses, 568–571 foreseeability, 553–558 investment risks, 477–484 limitation periods, 575–578 measure of liability, 550–565 practice, 558 principle, 550 proprietary remedies, 578–579 relief, 565–575 remoteness of loss, 552–553 scope of liability, 565–566 tracing, 578–579 vicarious liability, 507 trustees appointment court appointment, 517–519 generally, 515–520 new and additional trustees, 516–520 position of beneficiaries, 519–520 settlors’ role, 515 bare trustees, 415 breach of confidence, 13, 817–818 capacity, 411 charities disqualifications, 1014 liability, 1021 monitoring, 1013 conflicts of interest, 418–420, 441, 821–826 contemporary situation, 409–410 corporate trustees, 45–46, 407–409, 413–414 custodian trustees, 414 dealings with fund/ beneficiaries, 435–440 fair dealing, 439–440 self-dealings, 435–439 delegation See delegation discretion beneficiaries’ access to information, 533–542 control, 522–545 exercise, 524–529 Hasting-Bass rule, 529–533 powers and discretions, 522–524 duties accounts and records, 533–534 fiduciary See fiduciary duties generally, 415–416, 417–418 occupational pensions, 671–674 Index duty of care prudent man standard, 443 reform of non-delegation principle, 444 statutory duty, 443, 445–448 fiduciary relationship, 405–407 gratuitous trusteeship, 407–409 income tax, 360–362 investment See investment judicial trustees, 414–415 law reform, 410–411 liability See trustee liability, 1021–1023 nominees, 6, 415 numbers, 3, 411 ownership rights, 13 and personal representatives, 17–18 powers 19th Century, 406 advancement, 338–346 appointment See powers of appointment charities, 999–1000 generally, 416–418 maintenance, 347–353 powers and discretions, 522–524 remedies against, 546–579 removal, 521–522 remuneration agreement with beneficiaries, 426–427 authorised by trust instruments, 422, 423–425 commissions, 434–435 direct remuneration, 420–431 directors’ fees, 431–434 indirect remuneration, 431–435 litigation work by solicitor-trustees, 427–431 sample fees, 424–425 statutory authorisation, 425–426 retirement, 520–521 selection, 404, 407–408 standards of care, 46 traditional model, 407 Trustee Act, 410–411, 493 trusts and companies, 18–20 competing institutions, 15–20 concept, 2–3 and contracts, 16–17 creation See creation of trusts definitions, 3, 21 development process, 42–45 expenses, 486–487 flexibility, 307–309, 355, 402, 684 history See history of trusts mobility, 356–357 nature, 3–4 and personal representation, 17–18 and powers, 199–203 premature termination, 309–313 property See trust property role in English law, 54–61 uses, 4–12, 31–32 validity, 14–15 variation See variation of trusts versatility, 1–2, 4–5, 31–32 uncertainty See certainty unconscionability Australia, 26, 629–633 constructive trusts, 723–725, 812 creation of trusts, 134–138 family property and imputed trusts, 629–633 New Zealand, 26, 634 role, 65 undue influence, 567, 819–821 unincorporated associations beneficiary principle, 854 bequests to case law, 855–865 contractual theory, 862–864 generally, 854–866 problems, 854–855 validity, 854–855 charities, 879, 904 destination of assets on dissolution, 866–872 features, 852 inter vivos gifts to, 855, 863, 865–866 nature, 854 trusts and association rules, 852–854 types, 853 unit trusts, 9, 453, 644 United States constructive trusts, 585 Enron scandal, 825–826 investment impartiality, 496 investment risk, 486 remuneration of trustees, 422 spendthrift trusts, 276–278 trustee liability, 478 trusts and creditors, 275, 276–278 universities, 932, 991, 1013 unjust enrichment Canada, 26, 626–629 family breakdown, 626–629, 636 fiduciary relationship, 839 and restitution, 27–31 and tracing, 706–709 value added tax, charities, 918–919 Vandervell saga, 188–195 variation of trusts 1958 Act, 324–337 1958 Act in practice, 336–337 beneficial interests, 314 compromises, 315–318 exporting trusts, 333 generally, 313–338 law reform process, 308–309, 318–324 maintenance, 315 1049 1050 Index variation of trusts (cont.) meaning of benefit, 327–333 pre-1958 jurisdiction, 313–318 tax avoidance, 331–333 Variation of Trusts Bill, 321–324 vicarious liability, 507 victim support, 958 voluntary associations See unincorporated associations waqf, 35 Ward Court, 39 wealth preservation effect of trusts, 57–59 inherited wealth, 101–103 strict settlements, 48–51 trust purpose, 1–2, 8, 9–10, 31, 104–108 wealth tax, 110 welfare state and charities, 961–962 poverty relief, 937 Social Fund, 938 wills formalities, 139 limits on freedom of testation, 295, 296 mutual wills, 149–150 precatory words, 155–157 Wolfenden Report, 893–894, 895 women employment, 596, 607 feminism, 53–54 marriage settlements, 182, 279–280 married women’s property, 50–54, 55, 587–589 sexual division of labour, 595–596 Woodfield Report, 1025