Appendix 2

Extracts from Marketing Brochures and Legislation which Appear to Conflict

With the Fundamentals of the Trust Concept.

1. "The concern is to have peace of mind in knowing that the assets will pass to the appointed heirs without delay or encumbrance - and yet during the lifetime of the individual for the bank account to be controlled in the normal way"

(Extract from a bank’s private banking trusts marketing brochure).

2. "A trust is a form of legal relationship developed over many centuries...Depending on the client’s country of residence and tax status, the client may put himself/herself forward as a beneficiary.

(Extract from a bank trustee company’s marketing brochure).

3. "In basic terms, a Trust is a legal private agreement... between the person who places the assets in the Trust... and the individual or corporation entrusted with the protection, management and ultimate distribution of the assets... This private agreement between the Settlor and the Trustee..."

"In summary, a trust is a living "will" which works before and after the death of the Settlor"

(Extracts from a bank’s trust marketing brochure).

4. "If the trustees fail to comply with the "Memorandum of Wishes" the settlor’s right of redress is not under Trust Law, for breach of trust, but under the Law of Contract for non-compliance with the Memorandum of Wishes which is regarded as an implied contract".

(Extract from a bank’s trust marketing brochure).

5. "We understand that full control is an important characteristic you will insist on retaining during your lifetime...The main features and advantages/benefits of such a Trust are set out below:

5.1 Control- During your lifetime you retain effective control over distributions and investment decisions.

5.2 Administrative Convenience - You simply give instructions through your Relationship Manager..."

(Extracts from pro forma trust documentation provided by a bank for a proposed settlor).

6. "As a client of [ ], you are also our partner. Central to our ability to be an effective resource for you, we ensure that all our services reflect our commitment to confidentiality, convenience and reliability".

(Extract from a bank trustee company’s marketing brochure).

7. "At common law, a trustee is restricted in the degree to which functions and powers may be delegated to others. The ITA now amends the common law. A trustee has complete power to delegate all functions with the exception of the power of making distributions. This has fundamental benefits to clients."

(Extract from a trustee company’s marketing brochure).

8. "13C Retention of control and benefits by settlor

An international trust and a registered instrument shall not be declared void or be affected in any way by reason of the fact that the settlor, and if more than one, any of them, either-

(b) Retains possesses or acquires a power of disposition over the property of the trust or the subject of the instrument;

(f) Retains possesses or acquires the power to direct a trustee or protector on any matter: ..."

(Extract from Cook Islands International Trusts Act 1984, as amended).

9. "47 Retention of control by the settlor

An international trust shall not be declared invalid or be affected in any way if the settlor, and if more than one, any of them either -

(c) retains possesses or acquires any benefit, interest or property from the trust;

(e) retains possesses or acquires the power to direct a trustee or protector on any matter;..."

(Extract from Nevis International Exempt Trust Ordinance 1994).

10. S44 Retention of control and benefits by the settlor

A trust and a registered instrument shall not be declared invalid or a disposition declared void or be affected in any way by reason of the fact that the settlor ¼

(b) retains, possesses or acquires a power of disposition over property of the trust or the subject of the instrument;

(d) retains, possesses or acquires any benefit, interest or property from the trust or any disposition or pursuant to the instrument;

(g) retains, possesses or acquires the power to divert a trustee or protector on any matter;"

(Extract from the Marshall Islands Trust Law).

11. The Cook Island International Trusts amendment Act 1995 allows a trust instrument to provide that a trustee may delegate all the trustees’ powers, functions or discretions and for majority decision-making by trustees. These and other changes have been made "to add certainty to the law by removing the uncertainties and inequities of the common law and equitable processes".

(McNair, The Cook Islands Trusts Amendment Act 1995 Offshore Investment December/January 1995).

These quotations may be compared with the opening words of the leading work on the law of trusts "Underhill and Hayton Law of Trusts and Trustees" 15th Ed. By David Hayton Q.C.

"A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property), for the benefit of persons (who are called the beneficiaries or cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation. Any act or neglect on the part of a trustee which is not authorised or excused by the terms of the trust instrument, or by law, is called a breach of trust. The control of the trustee may, under the terms of the trust, be subject to fiduciary or personal powers vested in another person, who may sometimes be expressly designated a ‘protector’ or who may simply be the settlor or the settlor’s widow, brother or eldest son".

The author points out that the first two sentences were approved by Romer LJ in Green v Russell [199959] 2 QB 226 at 241. The definition is not exhaustive but it does help to distinguish other legal relationships such as agency, bailment and nominee arrangements.

© 1998 Peter Willoughby

Deacons Graham & James (Hong Kong)