TRUST and TRUSTEES. Use in Early English Law.—The use or trust 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, avoid ing of attainder and charging of portions. A use had also the advantage of being free from the incidents of feudal ten ure; it could be alienated inter vivos by secret conveyance, and could be devised by will. In 1535 the famous Statute of Uses (27 Hen. VIII. c. io ) was passed, forming the basis of con veyancing until it was repealed in 1925 by the Law of Property Act. 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 publicity of transfer, which it was the special object of the Statute of Uses to effect, was almost at once defeated.
Trusts.—A trust in English law is defined in Lewin's Law of Trusts, adopting Coke's definition of a use, as "a confidence re posed 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. 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 is, enforced by one not a party to its creation. A division often adopted in modern textbooks and rec ognized by parliament in the Trustee Act 1850, is into express, im plied 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 im plied 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. 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 inten tion. The law was consolidated by the Trustee Act 1893 and some subsequent amending statutes as the Law of Property Act, 1925.
Who May Be a Trustee or Cestui que Trust.—The Crown and corporations aggregate can be trustees. Provision is made by the Municipal Corporations Act 1882, for the administration of chari table and special trusts by municipal corporations. There are certain persons who for obvious reasons, even if not legally dis qualified, ought not to be appointed trustees. Such are infants, lunatics, persons domiciled abroad, felons, bankrupts and cestuis que trustent. Any one may be a cestui que trust except a corpo ration aggregate, which cannot be a cestui que trust of real estate without a licence from the Crown. For the Public Trustee, see below. The disabilities affecting some Roman Catholic charities were abolished by the Roman Catholic Relief Act 1926.
Creation and Extinction of the Trust.—A trust may be cre ated either by act of a party or by operation of law. The Statute of Frauds altered the common law by enacting that all declara tions 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. For the purpose of conveying or creating a legal estate they must be made by deed (Law of Property Act, 1925, S. 52). Interests created by parol are by will only (s. 54). 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 chattels 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. By s. 10 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 trus tee, 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 ef fect. 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 ap plication of rules of equity. They include resulting and con structive trusts. A resulting 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 creator and 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 bene fited. 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 of a 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 as 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. 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. Equitable interests in real estate in other countries 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 admin istration 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. (See Ewing v. Orr-Ewing, L.R. 9, A.C. 34.) Rights and Duties of the Trustee.—The principal general prop erties 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 deal ings 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 re ceipt being signed by the trustee; and a trustee is not chargeable with breach of trust by reason only of his having made or con curred 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 net 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 au thority 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 insti gation 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 properly to 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, 1925, 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; in real or heritable securities in Great Britain ; in stock of the Bank of England or the Bank of Ireland; in India 7, 51, 41, 31, 3 and 24 stock; in any securities, the interest of which is for the time being guaranteed by parlia ment; in consolidated stock created by the Metropolitan Board of Works, the London County Council; debenture stock created by the Receiver for the Metropolitan Police District, Metropoli tan Water stock; in the debenture or rent-charge or guaranteed or preference stock of any railway company in the United King dom 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 and in certain other railway or canal stocks ; 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 Sindh, Punjaub and Delhi Great Indian Peninsula and Madras Railways, etc.; and also in deferred annuities—comprised in the register of holders of annuity Class D, and annuities com prised 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, or 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 under any Act of Parliament or provisional order by the corporation of any municipal borough in the United Kingdom having, according to the returns of the last census prior to the date of investment, a population exceeding 5o,00o; or by any county council in the United Kingdom in certain water stocks; in securities authorized under the Colonial Stock Act, 1900, etc.; the Housing (Additional Powers) Act, 1919; loan securities issued by the Government of Northern Ireland ; in any of the stocks, funds or securities for the time being authorized for the invest ment 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 Trustee Act 1925 must be consulted for full information.