Graham Moffat

Trusts Law: Trusts in commerce IV: fiduciary relationships, commerce and the trust

Introduction The previous chapter in this commercial section of the book focused generally on the conscious use of a trust as a convenient method of achieving specific commercial objectives – thus falling within what was termed in Chapter 1 the ‘trust-twisting’ aspect of trust usage. The emphasis in this chapter shifts diametrically to the position where those engaged in some form of commercial activity may find themselves subject to fiduciary duties and, if in breach of those duties, may have imposed on them one or more of the equitable remedies, including constructive trusteeship, that the courts can call upon. Consider the following examples of problems that might be encountered: (1) Trustees appoint a solicitor, S, who, while carrying out their instructions, acquires confidential information about a company in which the trust fund has a substantial shareholding. Mistakenly believing that she has the trustees’ and beneficiaries’ consent, S acquires a large shareholding herself, reconstructs the company and makes a substantial profit for herself and the trust shareholding. A disgruntled beneficiary, whose proper consent was not obtained, claims that Ss shares are trust property. (2) A mining company, M, employs a geologist, G, to survey an area and report on any mineral deposits. G returns with relatively little information, but proceeds to stake claims to mineral deposits on her own behalf in the same area. M seeks to establish that the claims are rightfully its property. (3) An employee of bank A mistakenly overpays a large sum of money to bank B. The mistake is discovered by B, which takes no immediate action to rectify the position. B becomes insolvent and is put into liquidation before A discovers the error made by its employee. A wishes to recover the full amount overpaid. In none of these examples do we find a beneficiary claiming against a trustee. But a feature common to them all is that one of the possible remedies a court may impose, in the interests of what can be loosely called ‘justice’ or even ‘morality’, is a constructive trust. Consequently in examples (1) and (2) the ‘shares’ and the ‘mining claims’ may both become ‘trust property’ held by the legal owner now as trustee for those claiming the property.

Trusts Law: An introduction to trustees and trusteeship

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 him- 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 they will also 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 10). 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. In this context we concentrate in particular on the principle that trustees should not adopt a position where their personal interests, most notably in securing some financial reward for themselves, may conflict with their duties to the beneficiaries. Then, in Chapter 9 some of the significant powers and duties respectively conferred and imposed upon trustees in the management of trust property are considered. Finally, in Chapter 10 the emphasis shifts to the issue of control: can the settlor, the court or beneficiaries effectively regulate the exercise by trustees of these powers and duties? What remedies are available to beneficiaries when things go wrong? Also in Chapter 10 we discuss the statutory and common law provisions relating to appointment and removal of trustees. Discussion of this topic, variously described as technical and dull, is deferred until then because the authority to appoint and/or remove trustees can provide a key mechanism in seeking to control the trust and hold trustees accountable.

Trusts in commerce II: commerce and equitable remedies

Introduction The last decade of the twentieth century witnessed a fascinating resurgence of interest in, commentary on and litigation about equitable remedies. There are many reasons for this trend that has continued unabated but a prominent one is the presence of fraud. In litigation the aftermath of the collapses of BCCI and Asil Nadirs Polly Peck company, the Maxwell saga and mortgage fraud all made their contribution. One consequence ‘is that courts are increasingly concerned with attempts by the victims of fraud to trace their money and recover it, not from the fraudsters or their confederates, who have usually disappeared, but from those through whose hands it has passed’ (Millett QC (now Lord Millett) ‘Tracing the Proceeds of Fraud’ (1991) 107 LQR 71). Frequently the passage of money has involved sophisticated exercises in money laundering, often through bank accounts in several countries. Put simply money laundering is the process by which the proceeds of fraud or some other criminal activity are converted into assets which appear to have a legitimate origin, the purpose of the process being that the assets can then be retained permanently or even possibly recycled to finance further crimes. The process of tracing and the legal remedies by which the proceeds of fraud may be recovered have involved to some degree the processes and remedies provided by equity, and it is broadly within this commercial context that our study of equitable remedies is located.

Occupational pension schemes, equality and Europe : a decade of change

Abstract This article, drawing on a wide range of published survey data, examines the extent to which equal treatment has been introduced into the rules and practices of the 100,000-plus occupational pension schemes in the UK. It also considers the nature of the changes, whether these have been influenced by developments in EC law, and some distributional implications of the changes for present and future scheme members. The article argues that EC law acted as an important catalyst in accelerating an equalization process that for various social, economic and other legal reasons was already under way in some occupational pension schemes. It is suggested, however, that influence of EC law on the way in which equal treatment has been introduced can lead to detrimental consequences for some members of occupational pension schemes.