Online Encyclopedia

TRUST

Online Encyclopedia
Originally appearing in Volume V27, Page 334 of the 1911 Encyclopedia Britannica.
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TRUST and TRUSTEES, in the law of equity. In Roman and English law alike that legal relation between two or more persons implied in the word trust was of comparatively late growth. The trust of English law is probably based upon a combination of .the Roman conceptions of usus and fideicommissum. To usus is perhaps due the name as well as the idea of that right over property, co-ordinate with the right of the nominal owner, possessed by the person having the use. To fideicommissum appears to be due the name as well as the idea of that confidence reposed in another which is the essence of the modern trust. Usus was in Roman law a personal servitude, or right of one person over the land of another, confined to his personal wants and without the right to the produce and profits which ususfructus carried. It has little in common with the use of English law but the name and the conception of a dual ownership. The fideicommissum is more important (see ROMAN LAW). By the legislation of Justinian the law of legato was practically assimilated to that of fideicommissa. The only thing that distinguished the one from the other was the mode in which the gift was made: if by words of direct bequest it was a legatum, if by precatory words, a fideicommissum. It may be noticed, as an illustration of the course afterwards taken by the law in England, that fideicommissa in favour of the Church were so far favoured over others that if paid over by mistake they could not be recovered. In addition to usus and fideicommissum, the Roman division of ownership into quiritary and bonitary (to use words invented at a later time) may perhaps to some extent have suggested the English division into legal and equitable estate. The two kinds of ownership were amalgamated by Justinian. The gradual manner in which the beneficiary became subject to the burdens attaching to the property of which he enjoyed the benefit was a feature common to both the Roman and the English system. Use in Early English Law.—The use or trust2 is said to have been the invention of ecclesiastics well acquainted with Roman law, the object being to escape the provisions of the laws against Mortmain by obtaining the conveyance of an estate to a friend on the understanding that they should retain the use, i.e. the actual profit and enjoyment of the estate. Uses were soon extended to other purposes. They were found valuable for the defeat of creditors, the avoiding of attainder and the charging of portions. A use had also the advantage of being free from the incidents of feudal tenure: it could be alienated inter vivos by secret conveyance, and could be devised by will. In many cases the feoffee 2 to uses, as he was called, or the person seised to the use of another, seems to have been specially 2 Use seems to be an older word than trust. Its first occurrence in statute law is in 7 Ric. II. c. 12, in the form oeps. In Littleton " confidence " is the word employed. The Statute of Uses seems to regard use, trust and confidence as synonymous. According to Bacon, it was its permanency that distinguished the use from the trust. ' Feoffment, though the usual, was not the only mode of conveyance to uses. The preamble of the Statute of Uses mentions fines and recoveries, and other assurances. chosen on account of his rank and station, which would enable him to defy the common law and protect the estate of his cestui que use, or the person entitled to the beneficial enjoyment. The act of I Ric. II. c. 9 was directed against the choice of such persons. This alienation of land in use was looked upon with great disfavour by the common law courts, in whose eyes the cestui que use was only a tenant at will. Possibly the ground of their refusal to recognize uses was that the assizes of the king's court could only be granted to persons who stood in a feudal relation to the king. The denial of the right followed the denial of the remedy. The use was on the other hand supported by the court of chancery, and execution of the confidence reposed in the feoffee to uses was enforced by the court in virtue of the general jurisdiction which as a court of con-science it claimed to exercise over breach of faith. jurisdiction was no doubt the more readily assumed by ecclesiastical judges in favour of a system by which the Church was generally the gainer. A double ownership of land thus gradually arose, the nominal and ostensible ownership—the only one acknowledged in the courts of common law— and the beneficial ownership protected by the court of chancery. The reign of Henry V. to a great extent corresponds with that of Augustus at Rome, as the point of time at which legal recognition was given to what had previously been binding only in honour. The means of bringing the feoffee to uses before the court was the writ of subpoena, said to have been invented by John de Waltham, bishop of Salisbury and master of the rolls in the reign of Richard II. By means of this writ the feoffee to uses could be compelled to answer on oath the claim on his cestui que use. The doctrine of the court of chancery as to the execution of a use varied according as there was transmutation of possession or not. In the former case it was unnecessary to prove consideration; in the latter, generally a case of bargain and sale, the court would not enforce the use unless it was executed in law—that is, unless there was a valuable consideration, even of the smallest amount. Where no consideration could be proved or implied, the use resulted to the feoffor. This theory led to the insertion in deeds (especially in the lease of the lease and release period of conveyancing) of a nominal consideration, generally five shillings. Lands either in possession, reversion or remainder could be granted in use. Most persons could be feoffees to uses. The king and corporations aggregate were, however, exceptions, and were entitled to hold the lands discharged of the use. On the accession of Richard III., who from his position of authority had been a favourite feoffee, it was necessary to pass a special act (I Ric. III. c. 5), vesting the lands of which he had been feoffee either in his co-feoffees or, in the absence of co-feoffees, in the cestui que use. The practical convenience of uses was so obvious that it is said that by the reign of Henry VII. most of the land in the kingdom was held in use. The freedom of uses from liability to forfeiture for treason must have led to their general adoption during the Wars of the Roses.' The secrecy with which a use could be transferred, contrary as it was to the publicity required for livery of Seisin (q.v.) at common law, led to the interference of the legislature on several occasions between the reign of Richard II. and Henry VIII., the general tendency of the legislation being to make the cestui que use more and more subject'to the burdens incident to the owner-ship of land. One of the most important statutes was the Statute of Mortmain (15 Ric. II. c. 5), forbidding evasion of the Statute De Religiosis of Edward I. by means of feoffments to uses. Other acts enabled the cestui que use to transfer the use without the concurrence of the feoffee to uses (I Ric. III. c. I), made a writ of formedon maintainable against him (I Hen. VII. c. 1), rendered his heir liable to wardship and relief (4 Hen. VII. c. 17), and his lands liable to execution (19 Hen. VII. c. 15). At length in 1535 the famous Statute of Uses (27 Hen. VIII. c. to) was passed' The preamble of the statute enumerates the mischiefs which it was considered that the universal prevalence of uses had occasioned, among others that by fraudulent feoffments, fines, recoveries and other like assurances to uses, confidences and trusts lords lost their feudal aids, men their tenancies by the curtesy, women their dower, manifest perjuries in trials were committed, the king lost the profits of the lands of persons attainted or enfeoffed to the use of aliens, and the king and lords their rights of year, day and waste, and of escheats of felons' lands. To remedy this state of things it was enacted, inter alia, that, where any person was seised of any hereditaments to the use, confidence or trust of any other person by any means, the person having such use, confidence or trust should he seised, deemed and adjudged in lawful seisin, estate and possession of such hereditaments. Full legal remedies were given to the cestui que use by the statute. He was enabled to distrain for a rent-charge, to have action, entry, condition, &c. The effect of this enactment was to make the cestui que use the owner at law as well as in equity (as had been done once before under the exceptional circumstances which led to Ric. III. c. 5), provided that ' The use, as in later times the trust, was, however, forfeited to the Crown on attainder of the feoffee or trustee for treason. 2 It was adopted in Ireland exactly a century later by to Car. I. c. 1 (Ir.). The law of uses and trusts in Ireland is practically the same as that in England, the main differences being in procedure rather than in substantive law.the use was one which before the statute would have been enforced by the court of chancery. For some time after the passing of. the statute an equitable as distinct from a legal estate did not exist. But the somewhat narrow construction of the statute by the common law courts in Tyrrel's case 3 (1557) enabled estates cognisable only in equity to be again created. In that case it was held that a use upon a use could not be executed; therefore in a feoffment to A and his heirs to the use of B and his heirs to the use of C and his heirs only the first use was executed by the statute. The use of B being executed in him, that of C was not acknowledged by the common law judges; but equity regarded C as beneficially entitled, and his interest as an equitable estate held for him in trust, corresponding to that which B would have had before the statute. The position taken by the Court of Chancery in trusts may be compared with that taken in Mortgage (q.v.). The Judicature Act 1873, while not going as far as the Statute of Uses and combining the legal and equitable estates, makes equitable rights cognisable in all courts. From the decision in Tyrrel's case dates the whole modern law of uses and trusts. In modern legal language use is restricted to the creation of legal estate under the Statute of Uses, trust is confined to the equitable estate of the cestui que trust or beneficiary. Uses since 1535 The Statute of Uses is still the basis of conveyancing. A grant in a deed is still, after the alterations in the law made by the Conveyancing Act 1881, made " to and to the use of A." The statute does not, however, apply indiscriminately to all cases, as only certain uses are executed by it. It does not apply to leaseholds or copyholds, or to cases where the grantee to uses is anything more than a mere passive instrument, e.g. where there is any direction to him to sell the property. The seisin, too, to be executed by the statute, must be in another than him who has the use, for where A is seised to the use of A it is a common law grant. The difference is important as far as regards the doctrine of Possession (q.v.). Constructive possession is given by a deed' operating under the statute even before entry, but not by a common law grant, until actual receipt of rent by the grantee. The operation of the Statute of Uses was supplemented by the Statute of Inrolments and that of Wills (see WILL). The Statute of Inrolments (27 Hen. VIII. c. 16) enacted that no bargain and sale should pass a freehold unless by deed indented and enrolled within six months after its date in one of the courts at Westminster or with the custos rotulorum of the county. As the statute referred only to freeholds, a bargain and sale of a leasehold interest passed without enrolment. Conveyancers took advantage of this omission (whether intentional or not) in the act, and the practical effect of it was to introduce a mode of secret alienation of real property, the lease and release, which was the general form of conveyance up to 1845. (See CONVEYANCING.) Thus the publicity of transfer, which it was the special object of the Statute of Uses to effect, was almost at once defeated. In addition to the grant to uses there were other modes of conveyance under the statute which are now obsolete in practice, viz., the covenant to stand seised and the bargain and sale. Under the statute, as before it, the use has been found a valuable means of limiting a remainder to the person creating the use and of making an estate take effect in derogation of a former estate by means of a shifting or springing use. At common law a freehold could not be made to commence in futuro; but this end might be attained by a shifting use, such as a grant (common in marriage settlements) to A to the use of B in fee simple until a marriage, and after the celebration of the marriage to other uses. An example of a springing use would be a grant to A to such uses as B should appoint and in default of and until appointment to C in fee simple. The difficulty of deciding where the seisin was during the suspension of the use led to the invention of the old theory of scintilla iuris, or continued possibility of seisin in the grantee to uses. This theory was abolished , by 23 & 24 Viet. C. 38, which enacted that all uses should take effect by force of the estate and seisin originally vested in the person seised to the uses. The most frequent instances of a springing use are powers of appointment, usual in wills and settlements. There has been much legislation on the subject of powers, the main effect of which has been to give greater facilities for their execution, release or abandonment, to aid their defective execution, and to abolish the old doctrine of illusory appointments. Trusts.—A trust in English law is defined in Lewin's Law of Trusts, adopting Coke's definition of a use, as " a confidence reposed in some other, not issuing out of the land, but as a thing collateral, annexed in privity to the estate of the land, and to the person touching the land, for which cestui que trust has no remedy but by subpoena in Chancery." The term trust or trust estate is also used to denote the beneficial interest of the cestui que trust. The term truster is not used, as it is in Scotland, to denote the creator of the trust. A trust has some features in common with contract (q.v.); but the great difference between them is that a contract can only be enforced by a party or one in the position of a party to it, while a trust can be, and generally Dyer's Reports, 155a. is, enforced by one not a party to its creation. It has more resemblance to fideicommissum. But the latter could only be created by a testamentary instrument, whilst a trust can be created either by will or inter vivos; nor was there any trace in Roman law of that permanent legal relation which is suggested by the position of trustee and cestui que trust. The heir, too, in Roman law was entitled, from A.D. 7o to the reign of Justinian, to one-fourth of a hereditas fideicommissaria as against the beneficiary, while the very essence of the trust is its gratuitous character. Trusts may be divided in more than one way, according to the ground taken as the basis of division. One division, and perhaps the oldest, as it rests on the authority of Bacon, is into simple and special, the first being where the trust is simply vested in a trustee and the nature of the trust left to construction of law, the second where there is an act to be per-formed by the trustee. Another division is into lawful and unlawful, and corresponds to Bacon's division into intents or confidences and frauds, covins, or collusions. A third division is into public and private. A division often adopted in modern textbooks and recognized by parliament in the Trustee Act 185o, is into express, implied and constructive. An express trust is determined by the person creating it. It may be either executed or executory, the former where the limitations of the equitable interest are complete and final, the latter where such limitations are intended to serve merely as minutes for perfecting the settlement at some future period, as in the case of marriage articles drawn up as a basis of a marriage settlement to be in conformity with them. An implied trust is founded upon the intention of the person creating it; examples of it are a resulting trust, a precatory trust, and the trust held by the vendor on behalf of the purchaser of an estate after contract and before conveyance. In this case the vendor is sometimes called a trustee sub modo and the purchaser a cestui que trust sub mode. A constructive trust is judicially created from a consideration of a person's conduct in order to satisfy the demands of justice, without reference to intention. The distinction between an implied and a constructive trust is not always very consistently maintained. Thus the position of a vendor towards a purchaser after contract is sometimes called a constructive trust. The present law governing trusts rests upon the doctrines of equity as altered by legislation. The law was consolidated by the Trustee Act 5893 and some subsequent amending statutes. Its great importance has led to its becoming one of the most highly developed departments of equity. Who may be a Trustee or Cestui que Trust.—The modern trust is considerably more extensive in its operation than the ancient use. Thus the Crown and corporations aggregate can be trustees, and personalty can be held in trust. Provision is made by the Municipal Corporations Act 1882, for the administration of charitable and special trusts by municipal corporations. There are certain persons who for obvious reasons, even if not legally disqualified, ought not to be appointed trustees. Such are infants, lunatics, persons domiciled' abroad, felons, bankrupts and cestuis que trustent. The appointment of any such person, or the falling of any existing trustee into such a position, is generally ground for application to the court for appointment of a new trustee in his place. Any one may be a cestui que trust except a corporation aggregate, which cannot be a cestui que trust of real estate without a licence from the Crown. For the Public Trustee, see below. Creation and Extinction of the Trust.—A trust may be created either by act of a party or by operation of law. Where a trust is created by act of a party, the creation at common law need not be in writing. The Statute of Frauds altered the common law by enacting that all declarations or creations of trusts or confidences of any lands, tenements or hereditaments shall be manifested and proved by some writing, signed by the party who is by law enabled to declare such trust, or by his last will in writing, or else they shall be utterly void and of none effect. Trusts arising or resulting by implication or construction of law are excepted, and it has been held that the statute applies only to real estate and chattels real, so that a trust of personal chaittels may still be declared by parol. The declaration of a trust by the Crown must be by letters patent. Trusts created by will must conform to the requirements of the Will Act (see WILL). Except in the case of charitable trusts, the cestui que trust must be a definite person. A trust, for instance, merely for keeping up family tombs is void. Alteration of the trust estate by appointment of a new trustee could up to 186o only be made where the instrument creating the trust gave a power to so appoint,or by order of the court of chancery. But now by s. 50 of the 'Trustee Act 1893 (superseding Lord St Leonards's Act of 186o and the Conveyancing Act 1881), the surviving or continuing trustee or trustees, or the personal representative of the last surviving or continuing trustee, may nominate in writing a new trustee or new trustees. On such appointment the number of trustees may be increased. Existing trustees may by deed consent to the discharge of a trustee wishing to retire. Trust property may be vested in new or continuing trustees by a simple declaration to that effect. Also a separate set of trustees may be appointed for any part of the property held on distinct trusts. Trusts created by operation of law are those which are the effect of the application of rules of equity. They include resulting and constructive trusts. A results. ing trust is a species of implied trust, and consists of so much of the equitable interest as is undisposed of by the instrument creating the trust, which is said to result to the creatorand his representatives. An example is the purchase of an estate in the name of the purchaser and others, or of others only. Here the beneficial interest is the purchaser's. An example of a constructive trust is a renewal of a lease by a trustee in his own name, where the trustee is held to be constructively a trustee for those interested in the beneficial term. Besides being duly created, it is necessary for the validity of the trust that it should be a lawful one. An unlawful trust is one which contravenes the policy of the law in any respect. Examples of such trusts are trusts for a corporation without licence, for a perpetuity, and for purposes subversive of morality, such as trusts for illegitimate children to be hereafter born. Superstitious uses also fall under this head. There are also certain trusts which are avoided by statute under particular circumstances, such as settlements in fraud of creditors (see BANKRUPTCY). The law cannot be evaded by attempting to constitute a secret trust for an unlawful purpose. If an estate be devised by words prima facie carrying the beneficial interest, with an understanding that the devisee will hold the estate in trust for such a purpose, he may be compelled to answer as to the secret trust, and on acknowledgment or proof of it there will be a resulting trust to the heir-at-law. In the case of an advowson suspected to be held for the benefit of a Roman Catholic patron, there is a special enactment to the same effect (see 'QUARE IMPEDIT). The rules of equity in charitable trusts are less strict than those adopted in private trusts. Charitable trusts must be lawful, e.g. they must not contravene the Statutes of Mortmain; but a wider latitude of construction' is allowed in order to carry out the intentions of the founder, and they will not be allowed to fail for want or uncertainty of objects to be benefited. The court, applying the doctrine of cy pres (q.v.), will, on failure of the original ground of the charity, apply the funds as nearly as possible in the same manner. On this principle gifts originally made for purely charitable purposes have been extended to educational purposes. Further, trustees of a charity may act by a majority, but ordinary trustees cannot by the act ofa majority (unless specially empowered so to do) bind a dissenting minority or the trust property. A trust estate is subject as far as possible to the rules of law applicable to a legal estate of a corresponding nature, in pursuance of the maxim, ' Equity follows the law." Thus trust property is assets for payment of debts, may be taken in execution, passes to creditors in bankruptcy, and is subject to dower and curtesy, to the rules against perpetuities, and to the Statutes of Limitation. This assimilation of the legal and equitable estates has been produced partly by judicial decisions, partly by legislation. A trust is extinguished, as it is created, either by act of a party or by operation of law. An example of the former mode of extinction is a release by deed, the general means of discharge of a trustee when the purposes of the trust have been accomplished. Extinction by operation of law takes place when there is a failure of the objects of the trust: e.g. if the cestui que trust die intestate without heirs or next of kin, the property, by the Intestates Estates Act 1884, escheats in the same manner as if it were a legal estate in corporeal hereditaments. Equitable interests in real estate abroad are as a rule subject to the lex loci rei sitae, and an English court has no jurisdiction- to enforce a trust or settle a scheme for the administration of a charity in a foreign country. An English court has, however, jurisdiction to administer the trusts of a will as to the whole real and personal estate of a testator, even though only a very small part of the estate, and that wholly personal, is in England. This was decided by the House of Lords in a well-known case in 1883 (Ewing v. Orr-Ewing, L.R. 9, A.C. 34). Rights and Duties of the Trustee.—T he principal general properties of the office of trustee are these: (I) A trustee having once accepted the trust cannot afterwards renounce. (2) He cannot delegate it, but an inconvenience which formerly attached to dealings with trustees and trust property, in consequence partly of this rule, and partly of the liability of persons dealing with trustees to see that money paid to them was properly applied, was largely obviated by s. 17 of the Trustee Act 1893 (replacing s. 2 of the Trustee Act 1888), which in effect provides that a trustee may appoint a solicitor to be his agent to receive and give a discharge for any money or valuable consideration or property receivable by the trustee under the trust, by permitting the solicitor to have the custody of and to produce a deed having in the body thereof or endorsed thereon a receipt for the consideration money or other consideration, the deed being executed or the endorsed receipt being signed by the trustee; and a trustee is not chargeable with breach of trust by reason only of his having made or concurred in making any such appointment; and the producing of any such deed by the solicitor is a sufficient authority to the person liable to pay for his paying to the solicitor without the solicitor producing any separate or other direction or authority in that behalf from the trustee. (3) In the case of co-trustees the office must be exercised by all the trustees jointly. (4) On the death of one trustee there is survivorship: that is, the trust will pass to the survivors or survivor. (5) One trustee shall not be liable for the acts of his co-trustee. (6) A trustee shall derive no personal benefit from the trusteeship. The office cannot be renounced or delegated, because it is one of personal confidence. It can, however, be resigned, and legislation has given a retiring trustee large powers of appointing a successor. The liability of one trustee for the acts or defaults of another often raises very difficult questions. A difference is made between trustees and executors. An executor is liable for joining in a receipt pro forma, as it is not necessary for him to do so, one executor having authority to act without his co-executor; a trustee can show that he only joined for conformity, and that another received the money. The rule of equity by which a beneficiary who consented to a breach of trust was liable to indemnify the trustees to the extent of his interest has taken definite statutory shape in s. 45 of the Trustee Act 1893 (replacing s. 6 of the Trustee Act 1888), which enacts that when a trustee commits a breach of trust at the instigation or request, or with the consent in writing of a beneficiary, the High Court may, if it thinks fit, and notwithstanding that the beneficiary is a married woman entitled for her separate use and restrained from anticipation, make such order as to the court seems just for impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee. The rule that a trustee is not to benefit by his office is subject to some exceptions. He may do so if the instrument creating him trustee specially allows him remuneration, as is usually the case where a solicitor is appointed. The main duties of trustees are to place the trust property in a proper state of security, to keep it (if personalty) in safe custody, and to properly invest and distribute it. A trustee must be careful not to place himself in a position where his interest might clash with his duty. As a rule he cannot safely purchase from his cestui que trust while the fiduciary relation exists between them. Investments by trustees demand special notice. The Trustee Act 1893 has consolidated the law on this point, and provides, as it were, a code or charter of investment authorizing trustees, unless expressly forbidden by the instrument (if any) creating the trust, to invest trust funds in various modes, of which the more important are as follows: In any of the parliamentary stocks or public funds or government securities of the United Kingdom; on real or heritable securities in Great Britain or Ireland; in stock of the Bank of England or the Bank of Ireland; in India 31% stock and India 3% stock; in any securities, the interest of which is for the time being guaranteed by parliament; in consolidated stock created by the London County Council; in the debenture or rent-charge or guaranteed or preference stock of any railway company in Great Britain or Ireland incorporated by special act of parliament, and having during each of the ten years last past before the date of investment paid a dividend at the rate of not less than 3% on its ordinary stock; in the debenture stock of any railway company in India, the interest on which is paid or guaranteed by the secretary of state in council of India; in the " B " annuities of the Eastern Bengal, the East Indian and the Sind, Pun-jab and Delhi railways; and also in deferred annuities—comprised in the register of holders of annuity Class D, and annuities comprised in the register of annuitants Class C of the East Indian Railway Company; in the stock of any railway company in India upon which a fixed or minimum dividend in sterling is paid or guaranteed by the secretary of state in council of India, o1 upon the capital of which the interest is so guaranteed; in the debenture or guaranteed or preference stock of any company in Great Britain or Ireland established for the supply of water for profit, and incorporated by special act of parliament or by royal charter, and having during each of the ten years last past before the date of investment paid a dividend of not less than 5% per annum on its ordinary stock; in nominal or inscribed stock issued, or to be issued, by the corporation of any municipal borough having, according to the returns of the last census prior to the date of investment, a population exceeding 50,000; or by any county council under the authority of any act of parliament or provisional order; in any of the stocks, funds or securities for the time being authorized for the investment of cash under the control or subject to the order of the High Court. Trustees may from time to time vary any such investments for others of an authorized nature. The statutory power to invest on real securities does not, of course, authorize the purchase of realty; but by s. 5 of the Trustee Act 1893 a power to invest in real securities (in the absence of express provision to the contrary) authorizes investment on mortgage of leasehold property held for an unexpired term of not less than 200 years and not subject to a greater rent than one shilling a year, or to any right of redemption or condition of re-entry except for non-payment of rent. The position of trustees in respect of what was frequently an undue personal responsibility for the administration of their trust has been much improved by s. 8 of the Trustee Act 1888 (not repealed by the Trustee Act 1893) and s. 3 of the Judicial Trustees Act 1896. Sub-section (1) of the former enactment (with some omissions) runs as follows: " In any action or other proceeding against a trustee or any person claiming through him, except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee; or previously received by the trustee and converted to his use, the following provisions shall apply: (a) All rights and privileges conferred by any statute of limitations shall be enjoyed in the like manner and to the like extent as if the trustee or person claiming through him had not been a trustee or person claiming through him. (b) If the action or other proceeding is brought to recover money or other property, and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit of, and be at liberty to plead the lapse of time as a bar to such action or other proceeding in the like manner and to the like extent as if the claim had been against him in an action of debt for money had and received." The statutory period of limitation which trustees are thus permitted to plead is the six years fixed as the period of limitation for actions of debt by the Limitation Act 1623. It has been decided on the above section that in the case of a breach of trust consisting of an improper investment of the trust funds, time begins to run in favour of the trustee from the date of the investment. Sub-section (3) of the Judicial Trustees Act 1896 provides that " if it appears to the court that a trustee, whether appointed under that act or not, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the passing of that act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve the trustee either wholly or partly from personal liability for the same." Owing to the generally reduced rate of interest obtainable for money invested on trust securities, the court has in several instances, and even as against defaulting trustees, charged them with interest at 3% per annum (instead of 4%, which was formerly the recognized rate) upon sums found due from them to the trust estate. Under the old law trustees could not safely advance on mortgage more than two-thirds of the actual value of agricultural land or one-half of the value of houses. This " two-thirds rule " is now made statutory by s. 8 of the Trustee Act 1893, which enacts that " A trustee lending money on the security of any property on which he can lawfully lend shall not be chargeable with breach of trust by reason only of the proportion borne by the amount of the loan to the value of the property at the time when the loan was made, provided that it appears to the court that in making the loan the trustee was acting upon a report as to the value of the property made by a person whom he reasonably believed to be an able practical surveyor or valuer instructed and employed independently' of any owner of the property, whether such surveyor or valuer carried on business in the locality where the property is situate or elsewhere, and that the amount of the loan does not exceed two equal third parts of the value of the property as stated in the report, and that the loan was made under the advice of the surveyor or valuer ex-pressed in the report." The same section protects trustees for not investigating the lessor's title when lending on the leasehold security, and for taking a shorter title than they might be otherwise entitled to on the purchase or mortgage of any property, if they act with prudence and caution. By s. 9 (replacing s. 5 of the Trustee Act 1888) trustees who commit a breach of trust by lending more than the proper amount on any property are excused from making good any more than the excess of the actual loan over the sum which they might have properly lent in the first instance. Rights and Duties of the Cestui que Trust.—These may be to a great extent deduced from what has been already said as to the correlative duties and rights of the trustee. The cestui que trust has a general right to the due management of the trust property, to proper accounts and to enjoyment of the profits. He can as a rule only act with the concurrence of the trustee, unless he seeks a remedy against the trustee himself. Judicial Trustees.—The Judicial Trustees Act 1896, inaugurated a semi-official system of trusteeship which was new in England, but had been known in Scotland for upwards of 150 years. The general scope of the act is indicated by s. i (I), which runs as follows: " Where application is made to the court by or on behalf of the person creating or intending to create a trust, or by or on behalf of a trustee or beneficiary, the court may, in its discretion, appoint a person (in this act called a judicial trustee) to be a trustee of that trust, either jointly with any other person or as sole trustee, and if sufficient cause is shown, in place of all or any existing trustees." The act and the rules made under it (the Judicial Trustees Rules 1897) provide that judicial trustees shall be under the control and supervision of the court as officers thereof, and may be paid for their services out of the trust property. The trust accounts are to be audited annually, and a report thereon made to the court, which has power to order inquiries into transactions connected with the administration of the trust. A judicial trustee may be required to give security, and in any case has to keep the trust account with a bank approved by the court, and deposit title-deeds and other documents of title in such custody as the court directs. Communications between judicial trustees and the court with reference to their duties are permitted to be made with little or no formality, and strict proof of facts may be waived in proper cases. The act may, in short, be described as an attempt to provide for an official check upon the administration of trusts, while avoiding the formality and expense incident to the procedure in an administration action. Public Trustee.—A step further was taken by the Public Trustee Act 1906, which established the office of public trustee. By the act he is a corporation sole, with perpetual succession and an official seal and may sue and be sued under his official title. He may, if he thinks fit, act in the administration of estates of small value; as custodian trustee, or as an ordinary trustee; he may be appointed a judicial trustee, or administrator of a convict's property. The law of trusts generally is applicable to him and he can act either alone or jointly with other persons. He has an absolute discretion as to whether he will accept or not any trust, but cannot decline acceptance on the ground only of the small value of the trust property. He cannot accept any trust which involves the management or carrying on of a business, except in certain cases authorized under rules appended to the act. He cannot accept a trust under a deed of arrangement for the benefit of creditors, nor of an insolvent estate, nor one exclusively for religious or charitable purposes. His powers and duties are dealt with by the act under three headings: (I) In the administration of small estates.—On the application of any person entitled to apply to the court (i.e. the High Court, and as respects trusts within its jurisdiction, the county court) for an order for administration of any estate, the gross value of which is proved to the satisfaction of the public trustee to be less than f i000, he may administer the estate, and must do so if the persons beneficially entitled are persons of small means, unless he sees good reason for refusing. By declaration in writing signed and sealed by him the trust property other than stock vests in him, and the right to transfer or call for the transfer of any stock forming part of the estate, provided that he does not exercise the right of himself transferring stock without the leave of the court; this general provision also does not apply to copyhold, in respect of which he has the same powers to convey them as if he had been appointed under s. 33 of the Trustee Act 1893. Power is given to the court to order, for reasons of economy, that an estate being administered by the court be administered by the public trustee. (2) As custodian trustee.—The public trustee, if he consents to act, may be appointed custodian trustee on an application to the court, or by the testator, settlor or other creator of any trust or by a person having power to appoint new trustees. When he is so appointed the trust property is transferred to him as if he were the sole trustee, but the management of the trust property and any discretionary power remain vested in the other trustees. His relations with the managing trustees are further defined by the act. (3) As an ordinary trustee.—The public trustee may be appointed trustee, executor, &c., of any will or settlement or instrument of any date either under his official title or other sufficient designation. In a will a sentence to the following effect would be sufficient. " I appoint the Public Trustee executor and trustee of this my will." Where the public trustee has been appointed a trustee of any trust, a co-trustee may retire from the trust under s. 11 of the Public Trustee Act 1893 notwithstanding that there are not more than two trustees, and without such consents as are required by that section. The consolidated fund of the United Kingdom is liable to make good all sums required to discharge any liability which the public trustee, if he were a private trustee, would be personally liable to discharge, except where neither the public trustee nor his officers has contributed to it, and which neither he nor any of his officers could by reasonable diligence have averted. A person aggrieved by any act or omission or decision of the public trustee in relation to any trust may apply to the court, and the court may make such order in the matter as it sees fit. The act contains provisions for the investigation and audit of trust accounts, which may take place on the application of any trustee or beneficiary; if the parties do not agree upon a solicitor and public accountant for the purpose, they are appointed by the public trustee, who has entire discretion over the source from which the expenses are to be defrayed. The fees payable under the act are fixed by the Public Trustee (Fees) Order; they are of two kinds: fees on capital and fees on income. The object of the department is not to make a profit, but merely to pay expenses. Full information as to the machinery and procedure of the office and the requirements necessary to obtain the services of the public trustee are obtainable on application to the Public Trustee Office, Clement's Inn, London. Scotland.—The history of the law differs considerably from that of England, though perhaps the position of the Scottish trustee is now not very different from that of the trustee in England. The Statute of Uses did not apply to Scotland, since neither that nor any similar legislation was necessary in a system in which law and equity were administered by the same tribunals. Trusts seem to have existed from time immemorial. and have been frequentlyregulated by statute. The policy of the English Statute of Frauds was no doubt intentionally imitated in the Act 1696, c. 25, enacting that no action of declarator of trust should be sustained as to any deed of trust made for thereafter, except upon a declaration or back-bond of trust lawfully subscribed by the person alleged to be trustee and against whom or his heirs or assignees the declarator should be intended, or unless the same were referred to the oath of the party simpliciter. The act does not apply to all cases, but only to those in which by the act of parties documents of title are in the name of a trustee, but the beneficial interest in another. The person creating the trust is called the truster, a term unknown in England. On the other hand the term cestui que trust is unknown in Scotland. The office of trustee is prima facie gratuitous, as in England, it being considered to fall under the contract of mandate. Some of the main differences between English and Scottish law are these. There is no presumption in Scotland of a resulting trust in favour of a purchaser. A trust which lapses by the failure of a beneficiary goes to the Crown as ultimus heres. The office of trustee is not a joint office, therefore there is no right of survivorship, and on the death of a trustee the survivors are incompetent to act, unless a certain number be declared or presumed to be a quorum, or the office be conferred on trustees and the accedors and survivors of them. Sometimes the concurrence of one trustee is rendered absolutely necessary by his being named sine qua non. The Court of Session may appoint new trustees, but generally appoints a judicial factor. There has been a considerable amount of legislation, chiefly in the direction of extending the powers of trustees and of the cocrt in trust matters. The powers of investment given to trustees are much the same as those allowed in England. United States.—In New York and many other States uses and trusts have been abolished (with certain exceptions), and every estate, subject to those exceptions, is deemed a legal right cognisable in courts of law. Some of these exceptions are implied trusts and express trusts to sell land for the benefit of creditors, to sell, mortgage or lease lands for the benefit of legatees, or for the purpose of satisfying any charge thereon, to receive the rents and profits of lands and apply them to the use of any person during the life of such person or any shorter term, or to receive such rents and profits, and accumulate the same within the limits allowed by the law. Some states allow the creation of trusts (other than those arising by implication or operation of law) only by means of will or deed. Where the trust is of real estate, the deed must generally be registered. Forms of deeds of trust are given in the Statutes of Virginia and other states. The English doctrine of cy pres is being adopted in many states. A public trustee as a corporation sole exists in some states. A trustee under American law is generally entitled to compensation for his services. Spendthrift trusts, i.e. those under which the enjoyment of income bequeathed by will in such a way as to prevent creditors of the beneficiary from reaching it before it gets into his hands, are generally supported (Nichols v. Eaton, 91 United States Reports, 713). A " voting trust " is a concerted transfer of their shares in a corporation by a majority of the share-holders to trustees to hold and vote on them for a specified period for the purpose of securing the adoption or continuance of a certain line of corporate action. Any shareholder may recede from such an arrangement and reclaim his stock. Au'rnoxiTiEs.—The principal authority is Lewin's Law of Trusts; other treatises are those of Godefroi and Underhill. For American Law see Perry On Trusts. The principal authority on charitable trusts is Tudor. For the history may be consulted Bacon, Law Tracts; Reading, On the Statute of Uses; Gilbert, On Uses; Sanders, On Uses and Trusts; Spence, Equitable Jurisdiction, i. 435; Digby, His'. of the Law of Real Property, chs. vi., vii.
End of Article: TRUST
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