The Law of Trusts
Consultation Times: Tuesday (9.30-10.30)
WEEK 1: INTRODUCTION TO TRUSTS
What is a Trust?
Where one person is legally obligated to hold an asset for the benefit of another person
Incomplete description; trusts can arise where one person is legally obligated to hold an asset for a specified purpose and not for an individual person…e.g. trusts for charitable purposes (don’t raise obligations to benefit any one person as such, but raise benefits for a specific purpose). Purpose vs Person
Relationship b/w a trustee(s) (person/s or corporation(s) holding the asset) and a beneficiary(s) (person for which the asset was held) > Cestui Que Trust (Beneficiary) > anything with legal personality can be a trustee or a beneficiary (one person, a few people, class of people-descendants)
Only combination is isn’t permitted is if one person is both the trustee and a beneficiary; illogically impossible Primary factor: involves holding of an asset of some kind. Asset=ambigious nature which suggests a wider class of objects; anything that can be held as property, can be held on trust > and what they hold are rights they hold in respect to the thing, which constitute property. Property: constituted when people enjoy rights of exclusion and rights to use > can be bother tangible and intangible > contractual rights This are the rights acquired by the trustee when holding an asset; but the trust encumbers those rights in some way.
Obligation of Trusteeship and Property
Rights are fettered by the obligation owed by the trustee to the beneficiary; they are obliged to act in the best interest of the beneficiary; consistent with the obligation owed to the beneficiary. McFarlane and Stephenson: Different Possibilities
Take the view from below (Maitland), but say that the obligation of trusteeship gives the beneficiary a right that’s enforceable against the trustee; which is a right against rights. Hence, although the trustee has rights to a painting, the beneficiary’s right, is the right to direct, control and constrain the right of the trustee. Traditional View: to talk about obligation isn’t enough, but that the beneficiary comes to have property in the trust…beneficial interest in the trust asset. (Maitland is all about obligation) So how does an obligation generate property in a trusteeship: the way the law of trusts has developed, shows that courts did recognize that as a consequence of the beneficiaries right > persistence > the rights can be enforced not only against the trustee, but also other people in certain circumstances. Persists in the sense that they bind people other than the trustee; they follow the trust package. E.g. Painting analogy: Trustee has legal title, btu this is encumbered by the obligations of trusteeship (benefit of beneficiary); if T gives painting to family (gift)- then this is a legitimate exercise of T’s rights for property law purposes (so 3rd party now has legal title rights)…but unless the 3rd party has an available defense, the persistence of the right of obligation owed to the B, carries on to be assumed by the 3rd party who now holds legal rights to the painting. Hence, trust right will persist unless the 3rd party is acting in good faith (no knowledge/notice of the trust): this defence won’t hold up if the party doesn’t know, but ought to have known.
Persistence of Trust Rights:
Property rights gives protection in circumstances where someone who might otherwise be able to sue for breach of duty; is insolvent > money judgment in court But the persistence means that you can now go to the 3rd party who now holds the asset, but asserting your rights, recovering what was taken from the trust > Insolvency Protection > Bankruptcy Act specifically states that bankruptcy laws do not include assets held on trust.
Still an indeterminate area of law, no conceptual; clarity, hence no essential definition; emerged historically from people wanting protection for their...
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