Introduction

Management is a convenient umbrella term under which cluster a diversity of trustee tasks. In the case of those trusts not confined simply to the holding and retaining of legal title to designated property, the task dominating all others is that of protecting and indeed enhancing the value of the trust fund through effective investment. But trustees cannot just behave as individuals might with their own funds to invest. The courts of equity, in refining the obligations of trusteeship, have imposed a range of duties upon trustees, some of which impinge directly on the management of the trust fund. In this chapter we therefore consider, in addition to the duty of investment, the duties to act impartially between beneficiaries and not to delegate the trust. There is a complex interaction between these three topics. For example, on the one hand the variety of investments available to trustees suggests a need for expert help, and the process of investment-reinvestment itself necessarily involves some delegation of functions to intermediaries such as real estate valuers, stockbrokers, bankers and solicitors. On the other hand, in principle trustees have until recently been required to reserve to themselves the exercise of their discretions over investment decisions, especially with regard to the duty of impartiality. This long-held principle of non-delegation of discretions seemed increasingly to be at odds with a changing economic and social environment.

Introduction

One of the first decisions to be taken by a settlor or testator creating a trust concerns the selection of the trustees. Who should be appointed: the settlor himself or herself, a family friend, a professional person – probably an accountant or solicitor – or a corporate trustee such as a trust department or trust subsidiary of a bank, or indeed some combination of these? The decision is of the greatest importance. Not only may the trustees be empowered to decide beneficial entitlement but also they will be responsible for trust administration including preserving the value of the trust fund through effective investment. Decisions about whom to appoint assume the existence of people or organisations willing to serve as trustees. After all, people cannot be forced to become trustees of express trusts, and if appointed may immediately disclaim or subsequently retire (see Chapter 11). It may therefore be important that the law, in seeking to oversee the exercise of trusteeship, does not unduly discourage potential trustees.

This chapter and the next two are concerned predominantly with the benefits and burdens of trusteeship. First, this chapter focuses on the nature of trusteeship with particular reference to a possible source of tension created between, on the one hand, a concept of trusteeship rooted in moral obligation and, on the other, one which perceives trusteeship as a managerial function to be financially rewarded.

This book has a single underlying theme: that being a skilled lawyer means much more than acquiring the capacity to manipulate legal rules. It means having the ability to deal with people and their problems as a competent, ethical and socially responsible lawyer. This in turn requires that skills are developed in a reflective and critical environment, through a combination of what we call ‘skills’ and ‘process’ learning.

The main skills we explore are the classic lawyering or ‘DRAIN’ skills – Drafting (and its underlying writing skills), Research (which we widen into a concept we call problem-solving), Advocacy, Interviewing and Negotiation. You will be expected to develop those skills by practising, by analysing your practice, and then practising some more. At this level we hope you will gain some real insights into the ‘what’ and the ‘how’ of law in action.

The ‘process’ dimension takes us more deeply into the ‘why’ of lawyering. We shall ask you to draw on your experiences of the course and to reflect on our discussions of the practice of law, together with psychological, sociological, linguistic and management research which sheds light on what really happens in the law office and the courtroom. Through this, we hope you will be able to stand back from the skills and think about lawyering as something that is socially and culturally constructed. The lawyer plays an important role as a ‘gatekeeper to legal institutions and facilitator of a wide range of personal and economic transactions’.

Introduction

In Chapter 18 we noted that the Charitable Trusts Acts 1853–1860 established, for the first time, a central permanent Charity Commission empowered to supervise the management of charitable trusts and to remodel their purposes when they proved impracticable or impossible. But its role was severely constrained in three particular respects: (1) its jurisdiction, which extended to certain charitable endowments only and not to ‘collecting’ charities; (2) its freedom to act of its own motion, which was limited by the degree of autonomy preserved for trustees; and (3) the circumstances in which the Charity Commissioners (or the court) could make cy-près schemes.

Since then two trends in the legal and administrative framework regulating charity have become apparent. On the one hand, charities have been favoured more, notably in financial respects. On the other hand, an attempt has been made to extract a higher price from charities in return for these favours by extending and strengthening the supervisory framework, initially via the Charities Act 1960. This statute enacted most of the recommendations for reform contained in the Nathan Report (Committee on the Law and Practice Relating to Charitable Trusts (Cmd 8710, 1952)). Notwithstanding these changes, concern about the efficiency of charities and the effectiveness of supervision over them grew apace, culminating in a series of critical reports in the late 1980s (see An Efficiency Scrutiny of the Supervision of Charities (Woodfield Report) (1987); National Audit Office (NAO) Monitoring and Control of Charities in England and Wales (HC Paper no 380 (1986–87) and HC Paper no 13 (1990–91)); Public Accounts Committee (HC Paper no 116 (1987–88) and HC Paper no 85 (1991)).

Introduction

Commerce and the trust

The focus in this book has so far been on the use or imposition of the trust in various family contexts. It was often in response to problems posed in these contexts in particular that many of the basic rules of trusts law evolved. Some rules, for example, those relating to duties concerning investment and delegation, indirectly provide guidelines for commercial decisions to be taken during administration of a trust. But the trust concept has today also penetrated more directly into many and varied areas of commercial and financial activity (see Chapter 1 at p 9). In this chapter our focus shifts to one of those areas where the trust retains a significant role, namely collective saving for retirement via occupational pension provision. This is not to say that the trust does not feature significantly in other areas of commerce and finance. In the form of the ‘unit trust’, a hybrid creation comprising a complex amalgam of the concepts of common law contract and equitable trust, it provides a medium of collective investment for investors who wish to spread their risks over a wide range of securities (see Chapter 1). Recent estimates put the total number of unit trusts at closer to 1,800 with a market value in the region of £275 billion (thousand million) (Financial Statistics no 517, May 2005).

Introduction

Charity is a deep-rooted element in human behaviour. To provide emotional, spiritual or material comfort to those in need is an instinctive aspect of social behaviour, and is reinforced by religious and ethical precepts extolling it as one of the most ennobling forms of conduct (see generally Chesterman Charities, Trusts and Social Welfare (1979) ch 1). In the words of a standard legal text (Tudor on Charities (9th edn, 2003) p 1) elaborating on the words of Sir William Grant MR in Morice v Bishop of Durham (1805)): ‘in its widest sense, the word “charity” denotes “all the good affections that men ought to bear towards each other”.’ And at its best, charity invokes a warm response. There is a touching depth of pity and sympathy shown by the following message sent with a donation in 1966 to the Aberfan Disaster Trust Fund: ‘Please use this small amount in any way you wish. I was saving it up for a new coat, O God, I wish I had save [sic] more. Yours sincerely, A Mother’ (Nightingale Charities (1973) p 178). The Bob Geldof-inspired Band Aid Trust appeared to strike a similar chord when remarkably raising £69m in 1985 in aid of famine relief. And the fund-raising antics displayed on ‘Red Nose Day’ commonly raise in the region of £50m for Comic Relief to be used on a wide range of charitable purposes.

Introduction

As indicated at the end of Chapter 1, the trust concept originated in English law in medieval times, chiefly as a result of the efforts of conveyancers to preserve the landholdings of their clients from certain forms of feudal taxation and to increase the range of dispositions of land which their clients could legally make on death. The emergence of the trust concept at this time is intimately bound up with the assumption of jurisdiction in legal matters by the Lord Chancellor, on grounds of ‘equity’. In time, as we will see, that jurisdiction became sufficiently pervasive and ordered so as to justify substituting an upper case ‘E’ in place of the lower case ‘e’. The development of Equity in that manner involves matters that range far beyond those concerning the trust. Since it is the latter that is our prime concern, the roles are reversed here and Equity therefore appears in our story mostly as a member of the supporting cast only.

This chapter seeks to explain the development of major segments of trusts law – specifically, the law governing private express trusts – from these early beginnings until, approximately, the beginning of the twentieth century. It does so with particular reference to the trust transactions which served, in various ways, to aggregate and safeguard privately held wealth for the benefit of members of a family and to ensure the smooth transmission of wealth from one generation of a family to the next.

Trusts within the rules of an association

It will be seen in Chapters 18–20 that the trust has come to play an important part in the context of not-for-profit activity that the law regards as charitable. But the trust also has an important role to play, alongside other legal concepts such as contract, in non-charitable not-for-profit activity. Numerous not-for-profit organisations are formed not as companies or any other kind of corporate body, but as unincorporated associations. In Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522 Lawton LJ suggested that an unincorporated association will have the following features:

1. (i) two or more persons bound together for one or more common purposes (not being business purposes);

2. (ii) having mutual rights and duties arising from a contract between them;

3. (iii) in an organisation with rules to determine who controls it and its funds and on what terms; and

4. (iv) which members must be able to join or leave at will.

This last named requirement is contentious unless it means that membership is voluntary, since many unincorporated associations are likely to have rules which impose some restrictions on membership (see also Underhill and Hayton p 123 for a similar criticism).

The trust concept is invoked when the rules make provision – as they do commonly, but not in every case – for the property collectively owned by the association's members to be vested in the names of trustees.

Introduction

A ‘trust’ in English law is in some measure the translation into legal terms of the word ‘trust’ as used in ordinary speech. Its conceptual starting-point is ‘a confidence reposed in some other’ (this phrase is from the sixteenth-century legal commentaries of Lord Chief Justice Coke). The ‘confidence’ so reposed gives rise to moral obligations to which the courts, aided by the legislature, have purported to develop legal parallels. Inevitably, the moral weight given to trust and trusteeship in ordinary usage – to be ‘in breach’ of a ‘sacred trust’ is a serious matter, with repercussions possibly in the next world as well as this one – has had a significant impact on both the scope and the content of trusts law principles. There are still some contexts in which it may be difficult to say whether the word ‘trust’ is used in a legal or purely moral sense.

Yet this is by no means the whole story of trusts law. In the early twentieth century the historian and jurist F W Maitland praised the trust (see Equity (2nd edn, 1936) p 23 and Selected Historical Essays(1936) p 129); he regarded ‘the development from century to century of the trust idea’ as ‘the greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence’. But this was not because the trust embodied basic ethical principles but rather because of its versatility.

This book provides a bridge between academic and practical law. Its purpose is to introduce you to a set of highly transferable oral and written communication, group working, problem-solving and conflict resolution skills, and to develop them in a range of lawyering contexts: client interviewing, drafting, managing cases, legal negotiation and advocacy. The aims of this exercise are not to turn you, the reader, into a ready-formed legal practitioner, but:

• to help you develop a range of skills and attributes that will be useful to you in a variety of occupational settings;

• to enable you to experience and reflect critically on the problems and uncertainties of ‘real’ law, from the perspective of both lawyers and their clients;

• to enhance your understanding of the interplay between legal knowledge, skills and values in the lawyering process;

• to encourage and empower you to understand your own learning processes and to reflect critically upon them.

It is this dual emphasis on understanding lawyers' skills ‘in context’ – whereby our understanding is shaped by the contributions of socio-legal research into what lawyers do – and on reflection and critique which we believe distinguishes our ‘academic’ approach from the more functional emphasis of the vocational courses. At the same time we share with the vocational courses (and any undergraduate skills-based course for that matter) a belief that learning has to be grounded in doing. Skills are not acquired passively, but actively by experimentation and practice.

Introduction

An express trust satisfying the requirements of formality, certainty and complete constitution will be valid unless it contravenes certain overriding limitations which stem broadly speaking from public policy considerations. These limitations can be grouped for convenience into three categories. One category is concerned with attempts to defeat the creditors of settlors or beneficiaries by means of the trust. A second category comprises a loose class of prohibitions which cluster under the umbrella of public policy but are primarily concerned not to undermine accepted notions of morality and family solidarity. Trusts which might tend to interfere with the sanctity of marriage, for example, will be held void. The final category of limitations concerns the plane of time: while the law may place few restraints on the types of interest a settlor can create and the conditions to which they may be subject, restrictions are imposed through rules of perpetuity, accumulations and inalienability on the duration of trusts.

These limitations and their respective policy justifications form the subject-matter of this chapter.

At first sight, however, it must seem rather odd to devote a chapter to trusts and public policy, when a recurrent theme in the book is to weigh the rules of trusts law against non-legal policy considerations and to assess how the development of those rules has been influenced by such considerations.