Trusts and Patrimonies 9780748697755

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Trusts and Patrimonies

EDINBURGH STUDIES IN LAW Series Editor Elspeth Reid (University of Edinburgh) Editorial Board David L Carey Miller (University of Aberdeen) George L Gretton (University of Edinburgh) Hector L MacQueen (University of Edinburgh) Kenneth G C Reid (University of Edinburgh) Reinhard Zimmermann (Max-Planck Institute of Comparative and International Private Law, Hamburg) Volumes in the series: Elspeth Reid and David L Carey Miller (eds), A Mixed Legal System in Transition: T B Smith and the Progress of Scots Law (2005) Hector MacQueen and Reinhard Zimmermann (eds), European Contract Law: Scots and South African Perspectives (2006) John W Cairns and Paul du Plessis (eds), Beyond Dogmatics: Law and Society in the Roman World (2007) William M Gordon, Roman Law, Scots Law and Legal History (2007) Kenneth G C Reid, Marius J de Waal and Reinhard Zimmermann (eds), Exploring the Law of Succession: Studies National, Historical and Comparative (2007) Vernon Valentine Palmer and Elspeth Christie Reid (eds), Mixed Jurisdictions Compared: Private Law in Louisiana and Scotland (2009) J W Cairns and Paul du Plessis (eds), The Creation of the Ius Commune: From Casus to Regula (2010) James Chalmers, Lindsay Farmer and Fiona Leverick (eds), Essays in Criminal Law in Honour of Sir Gerald Gordon (2010) Elaine E Sutherland, Kay E Goodall, Gavin F M Little and Fraser P Davidson (eds), Law Making and the Scottish Parliament (2011) Neil Walker (ed), MacCormick’s Scotland (2012) Eric Descheemaeker (ed), The Consequences of Possession (2014) Remus Valsan (ed), Trusts and Patrimonies (2015) John W Cairns, Law, Lawyers, and Humanism: Selected Essays on the History of Scots Law, Vol 1 (2015) John W Cairns, Enlightenment, Legal Education, and Critique: Selected Essays on the History of Scots Law, Vol 2 (2015) www.euppublishing.com/series/esil

EDINBURGH STUDIES IN LAW VOLUME 12

Trusts and Patrimonies

Edited by Remus Valsan

© The Edinburgh Law Review Trust and the Contributors, 2015, for Chapters 1-4 and 6-10 © The Edinburgh Law Review Trust, 2015, for selection and organisation of Chapter 5 Edinburgh University Press Ltd The Tun – Holyrood Road 12 (2f) Jackson’s Entry Edinburgh EH8 8PJ www.euppublishing.com Typeset in New Caledonia by Servis Filmsetting Ltd, Stockport, and printed and bound in Great Britain by CPI Group (UK) Ltd, Croydon CR0 4YY A CIP record for this book is available from the British Library ISBN  978 0 7486 9774 8 (hardback) ISBN  978 0 7486 9775 5 (webready PDF) ISBN  978 1 4744 0353 5 (epub) The right of the contributors to be identified as authors of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 and the Copyright and Related Rights Regulations 2003 (SI No. 2498).

Contents

Preface and Acknowledgements List of Contributors List of Abbreviations Table of Cases

vii ix x xiv

INTRODUCTION   1 The Trust as Patrimony: An Introduction Remus Valsan

3

PART I: PATRIMONY AND THE COMMON LAW TRUST   2   3   4

Lepaulle Appropriated 13 Alexandra Popovici and Lionel D Smith Trust and Patrimony 42 Lionel D Smith Square Peg, Round Hole? Patrimony and the Common Law Trust 62 Paul Matthews PART II: PATRIMONY AND THE SCOTTISH TRUST

  5   6   7

Trusts without Equity George L Gretton Patrimony not Equity: The Trust in Scotland Kenneth G C Reid Scottish Trusts in the Common Law Lionel D Smith

87 110 127

PART III: TRUST AND PATRIMONY IN FRANCE, QUEBEC AND THE NETHERLANDS   8 Translating Part of France’s Legal Heritage: Aubry and Rau on the Patrimoine 163 Nicholas Kasirer

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trusts and patrimonies

  9 Trusting Patrimonies Alexandra Popovici 10 Dual Patrimony Dutch Style: The Magic Spell for Introducing the Trust in the Netherlands? Emile Schmieman

199

Index

244

221

Preface and Acknowledgements This collection of papers explores the multiple ways in which the concepts of trust and patrimony interact in various jurisdictions, with a view to advancing the understanding of the trust as a fundamental legal concept. The volume brings together key reference texts that have pioneered the trust as patrimony idea, and new works addressing contemporary challenges arising from the interaction of the two core concepts of private law. The new papers were presented at a workshop organised by the Edinburgh Centre for Private Law at the Edinburgh School of Law in 2013. This volume is the first comparative private law study that engages systematically with the relation between trust and patrimony. It underlines the difficulties that various jurisdictions have encountered, and the solutions they have adopted, in trying to understand the common law trust and replicate it using the patrimony as main tool. It includes the first English translation of the first chapter of Pierre Lepaulle’s flagship work on trusts, Traité théorique et pratique des trusts en droit interne, en droit fiscal et en droit international (1932). I am very grateful to the Paul-André Crépeau Centre for Private and Comparative Law and to Lionel Smith and Alexandra Popovici, in particular, for contributing this exquisite translation. The Scottish trust features prominently across the papers in this collection. It is hoped that the extensive focus on the Scottish trust will advance the understanding of this institution in Scotland and internationally, and will increase its visibility as a feasible model for a trans-systemic variant of trust. The editor, the publishers, and the Editorial Board of the Edinburgh Studies in Law would like to thank the authors and the following journals for kind permission to reproduce material: Revue générale de droit (Chapter 3 and Chapter 8), International and Comparative Law Quarterly (Chapter 5), European Review of Private Law (Chapter 6) and Edinburgh Law Review (Chapter 7). Full details of the date and place of first publication appear on the first page of each reprint in this volume. Subsequent references to these papers point to the relevant chapter in this book instead of their original place of publication. This volume, and the workshop that preceded it, would not have been possible without the generous financial support of the Edinburgh School of

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Law. I also note with gratitude the invaluable research and editorial assistance provided by María Paz Gatica Rodríguez, who is a doctoral student at Edinburgh School of Law. I would like to thank the editorial board of the Edinburgh Studies in Law and specifically to Professor Elspeth Reid for the continuous support and guidance for this project. I would also like to thank Professors Kenneth Reid and George Gretton for their encouragement and support throughouth this project. Finally, I would like to thank all participants in the Trusts and Patrimonies workshop for the lively debates and valuable insights. Remus Valsan School of Law University of Edinburgh

List of Contributors george l gretton is Lord President Reid Professor of Law, University of Edinburgh. The Honorable nicholas kasirer is judge at the Court of Appeal of Quebec. paul matthews is Solicitor Advocate at Withers LLP London and Honorary Professor, Dickson Poon School of Law, King’s College, London. alexandra popovici is Assistant Professor, Faculty of Law, McGill University; and Researcher, Paul-André Crépeau Centre for Private and Comparative Law. kenneth g c reid is Professor of Scots Law, University of Edinburgh. emile schmieman is Senior Legal Counsel in the Directorate for Legislation and Judicial Affairs (Private Law Section) of the Netherlands’ Ministry of Security and Justice; and Researcher in the Business and Law Research Centre of the Faculty of Law, Radboud University Nijmegen. lionel d smith is Sir William C Macdonald Professor of Law, Faculty of Law, McGill University; Researcher, Paul-André Crépeau Centre for Private and Comparative Law; and Professor of Private Law, Dickson Poon School of Law, King’s College London. remus valsan is Lecturer in Corporate Law in the School of Law, University of Edinburgh.

List of Abbreviations 1 Will IV 11 Geo IV ABGB AC Advocates’ Q AJCL AJLH ALJ All ER Anst App Cas art(s) Atk Bankton, Inst

BGB BGH Bro CC BW c(c) C de D CA CBLJ CCQ Ch ChD Ch D CLJ

1 William IV 11 George IV Allgemeines bürgerliches Gesetzbuch (Austrian Civil Code) UK Law Reports, Appeal Cases The Advocates’ Quarterly American Journal of Comparative Law American Journal of Legal History Australian Law Journal All England Reports Anstruther’s Exchequer Reports (England and Wales) UK Law Reports, Appeal Cases, House of Lords Article(s) (legislation) Atkyns’ Chancery Reports (England and Wales) Andrew McDouall, Lord Bankton, An Institute of the Laws of Scotland in Civil Rights (1751-1753), reprinted by the Stair Society, vols 41-43 (1993-1995) Bürgerliches Gesetzbuch (German Civil Code) Bundesgerichtshof (German Federal Court of Justice) Brown’s Chancery Cases (England and Wales) Burgerlijk Wetboek (Dutch Civil Code) Chapter(s) (legislation) Les Cahiers de Droit Court of Appeal Canadian Business Law Journal Civil Code of Québec English Law Reports, Chancery Division High Court of Justice, Chancery Division (England and Wales) English Law Reports, Chancery Division Cambridge Law Journal



CLR Co Rep Colum J Transnat L ColumLR Cornell LQ CSIH CSOH D D D DCFR DLR (4th) DP Dr & Sm

list of abbreviations

xi

Commonwealth Law Reports (Australia) Coke’s King’s Bench Reports (England and Wales) Columbia Journal of Transnational Law Columbia Law Review Cornell Law Quarterly Court of Session Inner House (Scotland) Court of Session Outer House (Scotland) Justinian’s Digest Dunlop’s Session Cases (Scotland) Recueil Dalloz Draft Common Frame of Reference Dominion Law Reports, 4th series (Canada) Discussion Paper Drewry and Smale’s Chancery Reports (England and Wales) ECR European Court Reports Edin LR Edinburgh Law Review ER English Reports ERPL European Review of Private Law Erskine, Inst John Erskine of Carnock, An Institute of the Law of Scotland, 8th edn, by J B Nicholson (1871, reprinted 1989) ETJ Estates & Trusts Journal ETPJ Estates, Trust & Pensions Journal EWCA Civ Court of Appeal, Civil Division (England and Wales) EWHC High Court (England and Wales) Gai Inst Gaius’s Institutes GLJ Guernsey Law Journal HarvLR Harvard Law Review HKLJ Hong Kong Law Journal HL House of Lords HLR Housing Law Reports (England and Wales) IBL International Business Lawyer ICLQ International and Comparative Law Quarterly InsO Insolvenzordnung (Germany) Inst Justinian’s Institutes ISAIDAT LR ISAIDAT (Istituto Subalpino per l’Analisi e l’Insegnamento del Diritto delle Attività Trans­ nazionali) Law Review

xii

J of Equity JLH JLR JR KB KB LFMR Louisiana LR LQR LR […] Eq McGill LJ Melbourne U LR Miami LQ MiFID NCCUSL NLJ NW OJ OJLS OUCLJ OR (2d) PC PGR QB QB Queen’s LJ R R (HL) R Central & East   European L R du N Rabels Z RGD RIDC

trusts and patrimonies

Journal of Equity Journal of Legal History Jersey Law Reports Juridical Review English Law Reports, King’s Bench Division High Court of Justice, King’s Bench Division (England and Wales) Law and Financial Markets Review Louisiana Law Review Law Quarterly Review Law Reports, Equity Cases (England and Wales) McGill Law Journal Melbourne University Law Review Miami Law Quarterly Markets in Financial Instruments Directive National Conference of Commissioners on Uniform State Laws New Law Journal North Western Reporter (United States) Official Journal of the European Communities Oxford Journal of Legal Studies Oxford University Commonwealth Law Journal Ontario Reports, 2nd series Privy Council Personen-undgesellschaftsrecht (Liechtenstein) English Law Reports, Queen’s Bench Division High Court of Justice, Queen’s Bench Division (England and Wales) Queen’s Law Journal Rettie’s Session Cases (Scotland) House of Lords cases in Rettie’s Session Cases (Scotland) Review of Central and East European Law Revue du Notariat Rabels Zeitschrift fur Auslandisches Internationales Privatrecht Revue General de Droit Revue Internationale de Droit Comparé

und



RJT RM Themis RRJ RSC RSNS RSO RTDCiv RTR s(s) S SA SALJ SC SC SC (HL) SCC Scot Law Com SCR SI SLT SQ Stair, Inst SRA TR Tul Civ LF Tulane LR UKSC WAR Washington and   Lee LR WLR WPNR WTLR Yale LJ ZASCA

list of abbreviations

xiii

Revue Juridique Themis Rechtsgeleerd Magazijn Themis Revue de la Recherche Juridique Revised Statutes of Canada Revised Statutes of Nova Scotia Revised Statutes of Ontario Revue Trimestrielle de Droit Civil Road Traffic Reports Section(s) (legislation) Shaw’s Session Cases (Scotland) South African Law Reports South African Law Journal Statutes of Canada Session Cases (Scotland) House of Lords cases in Session Cases (Scotland) Supreme Court of Canada Scottish Law Commission Supreme Court Reports (Canada) Statutory Instruments (United Kingdom) Scots Law Times Statutes of Quebec James Dalrymple, 1st Viscount Stair, Institutions of the Law of Scotland, 6th edn, by D M Walker (1981) Solicitors Regulation Authority (England and Wales) Term Reports in the Court of King’s Bench (England and Wales) Tulane European and Civil Law Forum Tulane Law Review United Kingdom Supreme Court Western Australian Reports Washington and Lee Law Review Weekly Law Reports (England and Wales) Weekblad voor Privaatrecht, Notariaat en Registratie Wills & Trusts Law Reports Yale Law Journal Supreme Court of Appeal of South Africa

Table of Cases Abdul Hameed Sitti Kadija v De Saram [1946] AC 208 . . . . . . . . . . . . . . . 88 Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 . . . . . . . . . . . . . . . . . . . . . 72 Allan’s Trustees v Lord Advocate 1971 SC (HL) 45. . . . . . . . . . . . . . . . . . 120 Attenborough v Solomon [1913] AC 76 . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 Ayerst (Inspector of Taxes) v C & K Construction Ltd [1976] AC 167. . . 139 Bain Ptr (1901) 9 SLT 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Banque Financière de la Cité SA v Parc (Battersea) Ltd [1991] 1 AC 221 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Braun v Blann & Botha NNO 1984 2 SA 850. . . . . . . . . . . . . . . . . . . . . . . 105 Butler v Broadhead [1975] Ch 97. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 Cailland v Eastwick (1794) 2 Anst 381 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Château Wilson inc v Fiducie familiale Pezeyre-Lacroix-Foch (2003) Doc 500-32-069887-026, 2003-07-23 J Michel A Pinsonnault, AZ-50184908 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133, 135, 137–8, 146–7 Croskery v Gilmour’s Trs (1890) 17 R 697 . . . . . . . . . . . . . . . . . . . . . . . . . 113 Cullen v Baillie (1846) 8 D 511. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Cunningham v Montgomery (1879) 6 R 1333 . . . . . . . . . . . . . . . . . . . . . . . 79 Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42. . . . 74 Dodds v Tuke (1884) 25 Ch D 617. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Don King Productions Inc v Warren [2000] Ch 291 . . . . . . . . . . . . . . . . . 136 Doré v Verdun (City) [1997] SCR 862 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 EL v Switzerland [2000] WTLR 873. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Farr v Newman (1792) 4 TR 620, 100 ER 1209. . . . . . . . . . . . 72, 140–1, 143 Ferguson v Paterson (1898) 25 R 697. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Foley v Burnell (1783) 1 Bro CC 274. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Foskett v McKeown [2001] 1 AC 102. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Fraser v Murdoch (1881) 8 R (HL); 127 (1881) 6 App Cas 855 . . . . . . . . . 73 Glasgow City Council v The Board of Managers of Springboig St John’s School [2014] CSOH 76 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Glennon v Federal Commissioner of Taxation (1972) 127 CLR 503. . . . . 149 Gordon v Cheyne 1824 2 S 675. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80



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Govan New Bowling-Green Club v Geddes (1898) 25 R 485. . . . . . . . . . 114 Hardoon v Belilios [1901] AC 118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Hayim v Citibank N A [1987] AC 730. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Hemphill v Orloff 213 NW 867; 41 HLR 86 . . . . . . . . . . . . . . . . . . . . . . . . 41 Heritable Reversionary Co v Millar (1892) 19 R (HL) 43. . . . 80, 92, 114, 120 Hopkins v Hopkins (1738) 1 Atk 581; 26 ER 365. . . . . . . . . . . . . . . . . . . . . 25 Hunter v Moss [1994] 1 WLR 452 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Inland Revenue v Clark’s Trs 1939 SC 11. . . . . . . . . . . . . . . . . . . . . . . . . . 114 Jennings v Mather [1901] 1 QB 108; [1902] 1 KB 1. . . . 47, 50, 73, 75–6, 131 Joint Administrators of Rangers Football Club plc, Noters [2012] CSOH 55; 2012 SLT 599. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Kennon v Spry (2008) 238 CLR 366. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Leigh and Sillavan Ltd v Aliakmon Shipping Co [1986] AC 785. . . . . 51, 132 Magnum Financial Holdings (Pty) Ltd v Summerly 1984 1 SA 160. . . . . 102 MCC Proceeds Inc v Lehman Brothers International (Europe) [1998] 4 All ER 675. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51, 132 Ministry of Health v Simpson [1951] AC 251. . . . . . . . . . . . . . . . . . . 137, 139 Muir v City of Glasgow Bank (1879) 6 R (HL); 21 (1879) 4 App Cas 337. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 . . . . . . . . . . . . 74 Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12 . . . . . . . . . 51, 132 Pearson v Lehman Bros [2010] EWHC 2914. . . . . . . . . . . . . . . . . . . . . . . . 71 Piggott v Aulton [2003] EWCA Civ 24; [2003] RTR 540. . . . . . . . . . . . . . 141 Pinchon’s Case (1572) 9 Co Rep 86b, 77 ER 859. . . . . . . . . . . . . . . . . . . . 143 Raath v Nel (473/2011) [2012] ZASCA 86 . . . . . . . . . . . . . . . . . . . . . . . . . 130 Re Barker’s Trust (1875) 1 Ch D 43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Re Bridgman (1860) 1 Dr & Sm 164. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Re Cockburn’s Will Trusts [1957] Ch 438. . . . . . . . . . . . . . . . . . . . . . . . . . 147 Re Diplock [1948] Ch 465. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137–9 Re Endacott [1960] Ch 232. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Re Frith [1902] 1 Ch 342. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48, 73 Re Griffith [1904] 1 Ch 807. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Re Hallett’s Estate (1880) 13 Ch D 696. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Re Harvey [1941] 3 All ER 284. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Re Johnson (1880) 15 Ch D 548. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49, 73 Re Leng [1895] 1 Ch 652. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Re Lysaght [1966] Ch 191. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Re Morgan (1881) 18 Ch D 93 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Re Piercy [1895] 1 Ch 83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

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Re Pumfrey (1882) 22 Ch D 255. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48, 73 Re Richardson [1911] 2 KB 705 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Re Silver Brothers; A-G Quebec v A-G Canada [1932] AC 514. . . . . . . . 152 Re Tankard [1942] Ch 69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Re Wells [1933] Ch 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Read v Bailey (1877) 3 App Cas 94. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Ritchie v Dickie 1999 SC 593. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Roberts v Gill & Co [2010] UKSC 22; [2011] 1 AC 240 . . . . . . 132, 139, 145 Royal Insurance (UK) Ltd v AMEC Construction Scotland Ltd [2007] CSOH 179; 2008 SC 201. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Royal Trust Co v Tucker [1982] 1 SCR 250 . . . . . . . . . . . . . . . . . . . . . 58, 201 Sharp v Thomson 1995 SC 455; 1995 SLT 837. . . . . . . . . . . . . . . . . . 114, 158 Shell UK Ltd v Total UK Ltd [2010] EWCA Civ 180; [2011] QB 86. . . . 132 Snell v Beadle 2001 JLR 118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 . . . . . . . . . . . . . . . . . . . . . . 54, 148 Sparkasse Bremen AG v Armutcu [2012] EWHC 4026. . . . . . . . . . . . . . . . 65 Sparkasse Hilden Ratingen Velbert v Benk [2012] EWHC 2432 . . . . . . . . 65 Stott v Milne (1884) 25 Ch D 710. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Strong v Bird (1874) LR 18 Eq 315. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Strother v 3464920 Canada Inc, 2007 SCC 24. . . . . . . . . . . . . . . . . . . . . . . 55 Ted Jacob Engineering Group Inc v Matthew [2014] CSIH 18; 2014 SC 579. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Trident Holdings Ltd v Danand Investments Ltd (1988) 64 OR (2d) 65; 49 DLR (4th) 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48, 133 Twinsectra Ltd v Yardley [2002] 2 AC 164. . . . . . . . . . . . . . . . . . . . . . . . . . 72 Watson v Trouteaud (1987) 5 GLJ 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Webb v Webb, Case C-294/92 [1994] ECR I-1717 . . . . . . . . . . . . . . . . . . . 96 Wewaykum Indian Band v Canada 2002 SCC 79; [2002] 4 SCR 245 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 White v White [2001] 1 AC 596 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Wright v Redgrave (1879) 11 Ch D 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Wyman v Paterson [1900] AC 271. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71, 79 X v A [2000] 1 All ER 490. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 DUTCH CASES Hoge Raad 25 January 1929, Nederlandse Jurisprudentie 1929/616 (Bierbrouwerij). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224



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Hoge Raad 14 June 1929, Nederlandse Jurisprudentie 1929/1424 (BUMA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 Hoge Raad 3 January 1941, Nederlandse Jurisprudentie 1941/470 (Boerenleenbank/Los). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 Hoge Raad 18 December 1959, Nederlandse Jurisprudentie 1960/121 (De Gouw/De Hamer). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 Hoge Raad 12 January 1968, Nederlandse Jurisprudentie 1968/274 (Mulder/Texeira de Matos) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 Hoge Raad 3 February 1984, Nederlandse Jurisprudentie 1984/752 (Notaris Slis-Stroom). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 Hoge Raad 19 may 1995, Nederlandse Jurisprudentie 1996/116 (Keereweer q.q./Sogelease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227–8, 234 FRENCH CASES*1 Cass. civ., 4 January 1825, Sir., 31, 1, 55. . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Bordeaux, 20 May 1830, Sir., 30, 2, 248 . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 Cass. civ., 19 January 1832, Sir., 32, 1, 687. . . . . . . . . . . . . . . . . . . . . . . . . 194 Toulouse, 20 February 1832, Sir., 32, 2, 389. . . . . . . . . . . . . . . . . . . . . . . . 194 Cass. civ., 15 November 1834, Sir., 34, 1, 777. . . . . . . . . . . . . . . . . . . . . . . 194 Angers, 13 March 1867, Sir., 68, 2, 273. . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

* Editor’s note: the references are in the original citation form and in keeping with the style used by the authors of the original text.

1  The Trust as Patrimony: An Introduction Remus Valsan*

Trusts exist in a multitude of forms across legal systems and traditions. This diversity of instruments makes it remarkably difficult to give a straightforward answer to a simple question: what is a trust? This volume does not purport to find a definitive answer to this thorny question. It aims, instead, to explore potential answers using the patrimony as the main conceptual tool. Before addressing the problem of defining the trust from a comparative private law angle, however, a more fundamental question needs to be given some consideration: why do we need to search for, and pin down, a common denominator for the broad spectrum of trusts and trust-like institutions? Can supra-national and system-neutral legal institutions exist? These are inveterate dilemmas of comparative law. The First International Congress of Comparative Law held in Paris at the dawn of the twentieth century was one of the many forums in which these questions have been debated over the years. André Weiss, a Parisian law professor and member of the French Academy of Moral and Political Sciences, was among the most virulent opponents of the idea of shared supra-national legal institutions. There are historical, commercial, religious and moral reasons, Weiss pointed out, why nations have different laws. Legal uniformity is a “dangerous chimera” that disregards the diversity of contexts and social institutions.1 Another participant to the Congress, the illustrious French jurist Raymond Saleilles, believed the contrary. Any profound comparative study of laws and legal institutions, Saleilles wrote, reveals that legal systems do not progress on parallel tracks. They share many points of

  * Lecturer in Corporate Law in the School of Law, University of Edinburgh.   1 A Weiss, “Rôle, fonction et méthode du droit comparé dans le domaine du droit civil”, in Société de Législation Comparé, Congrès international de droit comparé tenu à Paris du 31 juillet au 4 août 1900: Procès-verbaux des séances et documents, vol 1 (1905) 347 at 350.

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contact and their progress is fuelled by constant cross-fertilisation.2 Saleilles believed that this insight should be an impetus to give the comparative law the role of a science that, following the steps of history and sociology, should aim to identify common fundamental processes that regulate life across human societies. In order to fuel the legislative progress and the converging trend of national legal systems, Saleilles further observed, the comparative law should operate at three levels. First, it should observe and analyse national legal institutions in the economic and social context in which they developed. Second, it should seek commonalities and points of contact that indicate common trends in the evolution of these analogous legal institutions. Third, it should identify an ideal jural model (type idéal) towards which the existing analogous institutions should channel their developments.3 Consequently, the ultimate purpose of comparative law should be the articulation of a body of common jural concepts and institutions (fonds commun), which encapsulates the inherent unity of juridical life lying underneath a variety of manifestations.4 Saleilles hastened to add that the fonds commun is not meant to replace the jural diversity which stems naturally from a common body of legal ideas. Such a forced unification would eliminate competition and hinder the progress of national laws. The purpose of this body of common jural concepts, therefore, is to channel the natural development of the diverse manifestations that a legal institution has produced across jurisdictions towards a common desirable result, thus replacing unscientific transplants or assimilations of legal institutions.5 Over the past decades, several academic research projects have raised the prospect of creating something akin to Saleille’s type idéal in trust law. The Principles of European Trust Law, drafted in 1999 by a group of international experts, identify several core characteristics of the trust, with an aim to guide the creation and interpretation of trusts in various jurisdictions.6 Ten years later, the Draft Common Frame of Reference (DCFR) for a European private law set out in Book X model rules for the creation and operation of

  2 R Saleilles, “Séance de générale de clôture du 4 aout 1900”, in Société de Législation Comparé, Congrès international de droit comparé (n 1) 141 at 142.   3 R Saleilles,  “Conception et objet de la science du droit comparé”, in Société de Législation Comparé, Congrès international de droit comparé (n 1) 167 at 174-175.   4 Saleilles (n 2) at 143.   5 Saleilles (n 3) at 180-181.   6 D J Hayton, S C J J Kortmann, and H L E Verhagen (eds), Principles of European Trust Law (1999).



the trust as patrimony: an introduction

5

a system-neutral trust.7 The same year witnessed the publication of an unofficial proposal for new European Union legislation on protected funds in the commercial sphere.8 Although they have different goals, these projects share the underlying assumption that a type idéal in European trust law is both necessary and achievable. Not all jurists, however, share this assumption.9 And those that do are divided over the locus that the trust should occupy in the private law taxonomy. Does it belong to property, obligations, persons or somewhere else? One possible approach is that this long-debated question is “either unanswerable or uninteresting”.10 The trust exists at a “gravitational mid-point”11 between the three main areas of private law, and shares features with all of them. The need to pigeonhole the trust in one of the recognised categories of private law institutions, however, has polarised trust law jurists for many years, and continues to do so. The debate usually focuses on the nature of a trust beneficiary’s rights. It starts from the premise that all private law rights are either personal or proprietary, and therefore, the beneficiary’s right must find a place within one of these two categories. Frederic Maitland believed that the historical evolution of the beneficiary’s rights demonstrates that such rights are personal in nature; they are at all times rights against persons. Nevertheless, the multitude of persons against whom the trust could be enforced led to the characterisation of the beneficiary’s interest as a right in rem, a right in the trust property. Such understanding should be resisted, Maitland believed, since equitable estates and interests bear only misleading resemblances to the rights in rem.12 Austin Scott had a different view. He pointed out that the beneficiary has not only rights in personam against the trustee, but also rights in rem, enforceable against third parties.13 In contrast, Harlam Stone argued that the beneficiary has only rights in personam against the trustee with regard to the trust res,

  7 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR), vol 6, full edn (2009).   8 S C J J Kortmann, D J Hayton, N E D Faber, K G C Reid and J W A Biemans (eds), Towards an EU Directive on Protected Funds (2009).   9 See for example A Braun, “The framing of a European law of trusts”, in L Smith (ed), The Worlds of the Trust (2013) 277 at 299-301. 10 L Smith, “Stateless trusts”, in Smith (ed), Worlds of the Trust (n 9) 89 at 96. 11 G L Gretton, “Up there in the Begriffshimmel?”, in Smith (ed), Worlds of the Trust (n 9) 524 at 525. 12 F W Maitland, Equity; also, The Forms of Action at Common Law: Two Courses of Lectures (ed A H Chaytor and W J Whittaker, 1929) 120-122. 13 A W Scott, “The nature of the rights of the cestui que trust” (1917) 17 ColumLR 269 at 290.

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rather than a property right in the trust res against the world.14 Subsequent theories and debates on the nature of the trust tend to emphasise either the proprietary or the obligational nature of the trust arrangement. Some recent theories have brought new dimensions to the debate by proposing novel ways of understanding the trust. Within the property law field, one such innovative theory regards the trust fund as a distinct object of property. The trust beneficiary has property rights over the fund as a whole, not merely in a given set of individual trust assets. An interest in a fund is an interest not only in the assets it comprises at a given moment, but also in the assets accruing to the fund via exchange.15 The reification of the trust fund, however, raises significant difficulties. Every exercise of trustee’s dispositive powers would change the existing trust fund, thus creating a new trust over a new asset. Moreover, a trust fund comprising unascertained future assets lacks the specificity required of an object of property rights.16 A novel approach based on the obligational roots of the trust regards the trust beneficiary’s right as a hybrid of property and obligations. The beneficiary’s right is neither strictly personal against the trustee nor strictly proprietary against the trust res, but a right attached to the trustee’s right over the trust res. It is a sui generis type of right, a “right against a right” or “persistent right”.17 The beneficiary’s right relates to a specific right held in trust by the trustee and “persists” against any transferees that acquire a right depending on the trustee’s right. This type of jural relation could be found in the civilian tradition in the form of a real obligation (obligatio propter rem).18 Another view on the nature of the trust, which cuts across established categories, is the trust as an office.19 The trustee occupies an office, rather than being a mere contractual party. This explains why the death, mental 14 H Stone, “The rights of the cestui que trust” (1917) 17 ColumLR 467 at 470. For a more detailed historical survey of the in rem versus in personam debate see R Valsan, “Rights against rights and real obligations”, in Smith (ed), Worlds of the Trust (n 9) 481. 15 J Penner, “Duty and liability in respect of funds”, in J Lowry and L Mistelis (eds), Commercial Law: Perspectives and Practice (2006) 207 at 212; J Penner, “Value, property and unjust enrichment: trusts of traceable proceeds”, in R Chambers, C Mitchell and J Penner (eds), Philosophical Foundations of the Law of Unjust Enrichment (2009) 306 at 315. 16 B McFarlane, “The trust and its civilian analogues”, in Smith (ed), Worlds of the Trust (n 9) 512 at 515. 17 B McFarlane and R Stevens, “The nature of equitable property” (2010) 4 J of Equity 1; L Smith, “Trust and patrimony”, Ch 3 below. 18 See Valsan (n 14). 19 This view is particularly prominent in South Africa. See for example M J de Waal, “The core elements of the trust: aspects of the English, Scottish and South African trusts compared” (2000) 117 SALJ 548.



the trust as patrimony: an introduction

7

incapacity or lack of a trustee simply leads to the appointment of a new trustee rather than bringing the trust to an end. The trust viewed as an office is no longer a purely private law institution; it has a public element reflected, among other things, in the control that courts exercise over various aspects of trusteeship, such as supervision of the administration of trusts or variation of trusts.20 Trusts have also been defined using fundamental concepts from the law of persons. Several decades after his famous treatise on the law of trusts, Pierre Lepaulle argued that the best way to construct a civilian trust is to endow it with legal personality, to make it a new type of legal person.21 Madeleine Cantin Cumyn proposed a more inventive solution for conceptualising the Quebec trust. The Quebec trust should be recognised as a new form of legal actor (sujet de droit), alongside natural persons and legal persons.22 Finally, within the law of persons, trusts have been constructed using patrimony as the main building block. Patrimony is an attractive private law concept for civilians to understand and replicate the common law trust.23 It makes possible the segregation of trust assets from the trustee’s personal assets, and the corresponding segregation of creditors. Real subrogation allows exchanges and accruals to the trust fund without affecting the existence of the fund as a whole. It allows the trust beneficiary to enjoy continuing rights in a fluctuating group of assets. It is unsurprising, therefore, that trusts in many civilian and mixed jurisdictions are built around the notion of patrimony. Moulding a trust out of a patrimony, however, entails breaking some of the established rules governing the latter institution. The Scots trust has come to be regarded as a special patrimony that the trustee holds separate from his personal patrimony.24 This elegant solution was also adopted by other jurisdictions, including France25 and Romania.26 The price tag was sacrificing a principle that, at least on some views, is fundamental to civilian systems: the idea that each person has a single, 20 See T Honoré, “Trusts: the inessentials”, in J Getzler (ed), Rationalizing Property, Equity and Trusts: Essays in Honour of Edward Burn (2003) 7. 21 P Lepaulle, “The strange destiny of trusts”, in R Pound, E N Griswold and A E Sutherland (eds), Perspectives of Law: Essays for Austin Wakeman Scott (1964) 226 at 237-238. 22 M Cantin Cumyn, “La fiducie, un nouveau sujet de droit?”, in J Beaulne (ed), Mélanges ErnestCaparros (2002) 131 at 142. 23 See G Gretton, “Trusts without equity”, Ch 5 below. 24 See K Reid, “Patrimony not equity: the trust in Scotland”, Ch 6 below. 25 Articles 2011 to 2031 of the French Civil Code. 26 Articles 773 to 791 of the Romanian Civil Code.

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­indivisible, patrimony.27 The Quebec trust is conceptualised as an autonomous patrimony, drawing inspiration from Pierre Lepaulle’s understanding of the common law trust. 28 The Quebec trust breaks the traditional civilian principle one person–one patrimony in a different way: it is a patrimony without a holder. The recognition of the trust as ownerless patrimony has generated ripple effects across the overall juridical arrangement of private law in Quebec, by recognising the existence of rights that, instead of being held by a titulary, are appropriated to a purpose.29 A deeper insight into the concept of patrimony in the civilian tradition reveals that the price to pay for fashioning trusts out of the patrimony may not be as great as it appears at first sight. It has been argued that, historically, the one person-one patrimony principle was not quintessential to the civil law tradition in general. The principle was developed for French law by Aubry and Rau in the nineteenth century, who inferred its existence from various provisions of the Napoleonic Code.30 Moreover, the rule that every person has one undivided patrimony is not absolute. Maurizio Lupoi notes that the idea of assets segregated from their owner’s patrimony has been recognised in many European civilian traditions for many years.31 For example, the fiduciary heir (heres fiduciarius) holds assets segregated from his personal assets, which are unavailable to his personal creditors. Asset segregation is perfectly compatible with civil law principles, Lupoi argues, as long as it concerns assets which come to be owned by someone, such as a trustee, in order to be segregated (as opposed to self-segregation, or segregation through the settlor’s unilateral act).32 The objections based on the one person-one patrimony principle aside, the idea of patrimony as a building block for the trust still has some obstacles to overcome. On a general level, patrimony may not be a suitable concept 27 For a discussion of this principle in French law see N Kasirer, “Translating part of France’s legal heritage: Aubry and Rau on the Patrimoine”, Ch 8 below. 28 See L Smith and A Popovici, “Lepaulle appropriated”, Ch 2 below. Lepaulle’s idea of the trust as patrimony by appropriation has inspired the Czech trust fund introduced in sections 1448 to 1474 of the new Czech Civil Code, in force as of 1 January 2014. Heavily influenced by the Quebec trust, the Czech trust fund seems to be conceptualised as an ownerless patrimony. See T Richter, “National report for the Czech Republic”, in Kortmann et al (eds), Towards an EU Directive (n 8) 59 at 60. 29 A Popovici, “Trusting patrimonies”, Ch 9 below. 30 See Kasirer (n 27). 31 M Lupoi, “The development of protected trust structures in Italy”, in D J Hayton (ed), Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (2002) 85 at 86. 32 Ibid at 88, emphasis in original. For examples from the Dutch law see E Schmieman, “Dual ­patrimony Dutch style: the magic spell for introducing the trust in the Netherlands?”, Ch 10 below.



the trust as patrimony: an introduction

9

to explain the common law trust, simply because it does not exist in the common law.33 Seemingly similar notions, such as that of estate, are not complete common law equivalents of the civilian patrimony and therefore cannot act as substitute. Since patrimony is not a common law concept, using it to explain the common law trust may create the same kind of problem as the common law trust creates for civil law. A more technical potential obstacle is the fact that the common law trust does not work entirely as a separate patrimony; there is no complete separation on the liabilities side.34 A trustee assumes liability personally, even when acting qua trustee, and is answerable with all assets he owns beneficially. Of course, the trustee has the right to be indemnified out of the trust assets, but he bears the risk that the trust assets are insufficient or illiquid. The lack of complete passive separation, however, is not a feature of all common law trusts. The American trust law has come to recognise the dual fiduciarypersonal capacity in which a trustee may act.35 Accordingly, a creditor of the trustee acting qua trustee recovers directly from the trust fund without access to trustee’s personal assets.36 Furthermore, some authors believe that the civilian real subrogation and the common law tracing are not perfect equivalents. Real subrogation seems to be doing more than tracing does. While the first institution creates a new claim to the substituted asset, tracing is merely the evidentiary process of identifying misappropriated value.37 Notwithstanding these apparent shortcomings, the patrimony avenue remains a very promising direction for a system-neutral trust. The multiple patrimonies idea, in particular, “may indicate the way towards a European ius commune” 38 in trust law. Given the increasing commercial utility of the trust institution in today’s global commercial and financial context, the quest for a general and flexible supra-national trust concept is bound to intensify.

33 See P Matthews, “Square peg, round hole? Patrimony and the common law trust”, Ch 4 below. 34 See L Smith (n 17). 35 See American Law Institute, Restatement of the Law Third: Trusts (2003-2012), ss 105-106. 36 R Sitkoff, “Trust law as fiduciary governance plus asset partitioning”, in Smith (ed), Worlds of the Trust (n 9) 428 at 436. 37 M Raczynsnka, “Parallels between the civilian separate patrimony, real subrogation and the idea of property in a trust fund”, in Smith (ed), Worlds of the Trust (n 9) 454 at 469-470. 38 D J Hayton, “English trusts and their commercial counterparts in continental Europe”, in Hayton (ed), Extending the Boundaries (n 31) 23 at 44.

2  Lepaulle Appropriated Alexandra Popovici* and Lionel D Smith**

A. INTRODUCING THE TRANSLATION (1) The project (2) The author (3) The book (4) The appropriation B. THE TRANSLATION

13 13 14 14 16 18

A. INTRODUCING THE TRANSLATION (1) The project We were honoured when Remus Valsan invited us to translate into English this important text by Pierre Lepaulle, for inclusion in the present volume.1 The Crépeau Centre has a tradition of translating foundational texts of the French civilian tradition.2 The goal is to make these texts available to an English readership, while preserving the civilian character of the original. But working in civil law English, for a common law and civil law audience, is not an easy enterprise; both readerships might feel a little uneasy with certain choices made. Translators, like trustees, exercise judgment on behalf of another; they do not have the luxury of being faced with only one correct course of action. * Assistant Professor, Faculty of Law, McGill University; Researcher, Paul-André Crépeau Centre for Private and Comparative Law. ** James McGill Professor and Director, Paul-André Crépeau Centre for Private and Comparative Law, Faculty of Law, McGill University.   1 We thank Jean-Frédéric Hübsch, formerly a researcher in the Crépeau Centre, for invaluable assistance with the translation.  2 Some examples come from the pen of Nicholas Kasirer, formerly Director of the Centre: N Kasirer, “Portalis Now” in N Kasirer (ed), Le droit civil: avant tout un style? (2003) 1; N Kasirer, “Translating Part of France’s Legal Heritage: Aubry and Rau on the Patrimoine”, Ch 8 below; N Kasirer, “What is the Place of Les obligations in Quebec Civil Law?” in B Moore (ed), Mélanges Jean-Louis Badouin (2012) 455. Centre member David Lametti is currently translating work of Louis Josserand on the abuse of rights.

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In translating Lepaulle and his vision of the common law trust as an affected patrimony, we chose simply to appropriate Lepaulle. The exercise involves translation, but is first and foremost a legal enterprise. Common law, civil law, civil law in English, and comparative law are all at play in this text, involving both our vision of the trust today and Lepaulle’s understanding of both the common law and the civil law of his time. What is fascinating and essential to underline, however, is how this kind of work has a reflexive impact not only on the notions of trust and patrimony but also on civil law in French, and on private law more generally, including the common law. (2) The author An obituary in the Bulletin de la société de législation comparée provides some information about Lepaulle’s life.3 He was born in 1893 and studied philosophy and law before being called into military service in 1913. He applied for a scholarship to study in the US near the end of the war, and learned of his success a year later.4 He departed in 1919, a week after being released from service. He spent most of his time at Harvard, where he earned the SJD, and returned to France in 1923, where he completed his French doctorate in Paris.5 He must have made a strong impression at Harvard; decades later, he contributed to collections of essays published in honour of Austin Scott and Roscoe Pound.6 In Paris, he practised as an advocate over a lengthy career, during which he also taught foreign and comparative law. His publications ranged over many fields. He died on 13 May 1979. (3) The book The Traité théorique et pratique des trusts en droit interne, en droit fiscale et en droit international was published by Rousseau et cie in Paris in 1932. It clearly represents the outcome of a long period of reflection, going back   3 (1979) 31 Bulletin de la société de législation comparée 652.  4 See http://www.ourstory.info/3/FF/c/Lepaulle.html.  5 Interestingly, neither thesis was on trusts. His Harvard doctorate was on the interaction of administrative law and international law: Administrative Law in Front of International Law (1922), noted in the Harvard catalogue as a typewritten thesis. His French thesis was on foreign companies in US law: De la condition des sociétés étrangères aux États-Unis d’Amérique (1923).   6 P Lepaulle, “Reflections on the sources of law”, in R A Newman (ed), Essays in Jurisprudence in Honor of Roscoe Pound (1962) 87; P Lepaulle, “The strange destiny of trusts”, in R Pound, E N Griswold and A E Sutherland (eds), Perspectives of Law: Essays for Austin Wakeman Scott (1964) 226.



lepaulle appropriated

15

to Lepaulle’s time at Harvard, and it followed a series of shorter texts in both English and French.7 It was immediately reviewed in glowing terms by the Oxford trust lawyer H G Hanbury,8 and by Harvard’s Zechariah Chafee.9 The book has had a great influence. Almost immediately, it impacted the law in Mexico, where the federal legislature deployed Lepaulle’s thinking in modifying the statutory fideicomiso.10 More recently, his theory was adopted in the Civil Code of Québec; it is visible not only in the articles that define the nature of the Quebec trust (arts 1260-1261), but also near the beginning of the book on Property (art 915), where the Code teaches, echoing Lepaulle, that the appropriation of property to a purpose stands on the same conceptual level as the ownership of property, while yet standing apart from it. More recently, the Quebec trust has been adopted in the new Civil Code of the Czech Republic, which came into force on 1 January 2014. Although it may not be possible to establish a bond of filiation, it is also interesting to observe that the Catalan Civil Code now provides for a “protected patrimony” for disabled or dependent persons; this patrimony, like Lepaulle’s understanding of the trust, has no titulary.11 What Lepaulle aimed to do was to explain the common law trust to a civilian audience, using the vocabulary and the conceptual tools of the civil law in its French manifestation. This too was an act of appropriation, of translation, even of transliteration.12 Lepaulle speaks regularly of technique juridique: this reflects an understanding that juridical constructions (of which legal personality was another) can be deployed to achieve purposes of social   7 “Civil law substitutes for trusts” (1927) 14 Yale LJ 1126; “De la validité des trusts en France” (1927) 22 Revue de droit international privé 309; “De la nature du ‘Trust’” (1927) 54 Journal du droit  international privé 966; “An outsider’s view point of the nature of trusts” (1928) 14 Cornell  LQ 52; “Les fonctions du ‘trust’ et les institutions équivalents en droit f­rançais” (1929) 58 Bulletin de la société de législation comparée 312; “Les éléments essentiels du trust” (1930) 59 Bulletin de la société de législation comparée 467; “The resident of France in face of the trust problem” (1931) 11 Proceedings of the American Foreign Law Association. Most of these are listed under “Du même auteur” at the front of the Traité (facing the title page).   8 (1932) 48 LQR 586; reprinted in H G Hanbury (ed), Essays in Equity (1934) 69.   9 (1933) 46 HarvLR 535. At 540 Chafee said, “… it is to be hoped that an English translation can soon be published so that M Lepaulle’s ideas may receive the wide attention they deserve”. 10 R Molina Pasquel, “The Mexican fideicomiso: the reception, evolution and present status of the common law trust in a civil law country” (1969) 8 Colum J Transnat L 54. The author notes that the 1932 amendments replaced an earlier kind of trust that was premised on irrevocable mandate. The provisions are now in the Ley General de Títulos y Operaciones de Crédito, arts 381 ff. 11 Arts 227-1 to 227-9. 12 See A Popovici, “La fiducie québécoise, re-belle infidèle”, in A Popovici, L Smith, and R Tremblay (eds), Les intraduisibles en droit civil (2014) 129.

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policy. He understood the common law trust, in general and in detail, in a way that was probably unique among civilian authors of his time; and unique also was his exposition, which on its face would have been incomprehensible to most common lawyers, and not only for being written in French. The common law simply does not have the concept of the patrimony, which is central to Lepaulle’s argument.13 (4) The appropriation This translation is only of the first chapter. The book runs to 442 pages, and although perhaps one day it will be translated in its entirety, we have made a more modest start. As trustees of Lepaulle’s text – trustees de son tort, perhaps – we have had to make some decisions. We have favoured civil law English throughout, taking our cues particularly from the English text of the Civil Code of Québec and from the Dictionaries of the Crépeau Centre.14 To give two concrete examples, acte constitutif is translated as “constitutive act”, not as “trust instrument” or otherwise; revenus are “revenues” and not income. Inevitably, some words gave us difficulty. Here we mention only one: société, which in Lepaulle’s French stands for both partnerships and corporations, and this, to add another layer of complication, in a context in which partnerships have legal personality. We have translated the word differently in different places, taking account as best we could of the point that Lepaulle was trying to make in each case.15 A recurring question, naturally, surrounds affectation. In the Civil Code of Québec, the English equivalent of patrimoine d’affectation is “­patrimony by appropriation”. In this case, however, we have generally used the English word “affectation” as a better reflection of what Lepaulle was aiming to describe. We note that, as in the title of the Traité, Lepaulle always uses the word “trust” when referring to the common law trust and to the trust idea in 13 In this sense, Lepaulle’s project may be an early example of “a type of legal scholarship which might be dubbed ‘oxymoronic comparative law’. That is to say, it employs a concept from one legal tradition in order to interrogate another where, on the face of it, it does not belong”: E Descheemaker and H Scott, “Iniuria and the Common Law”, in E Descheemaker and H Scott (eds), Iniuria and the Common Law (2013) 1 at 1. 14 The dictionaries are now freely available online: https://nimbus.mcgill.ca/pld-ddp/dictionary. 15 We note also that the bibliographic references in Lepaulle’s footnotes are occasionally incomplete and inconsistent; one might even say, unfinished. We have preserved them in this way because it helps to give a flavour of the text. We have, however, added some notes in the relevant places.



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g­ eneral. In the one place in this chapter where he uses fiducie, we have left it untranslated. Translating Lepaulle’s text means coming to terms with the ways in which he calls into question some fundamental ideas: what is law, and what is a juridical technique? What is a subjective right, and can rights exist without subjects? Are some legal concepts untranslatable?16 Even though the common law does not have the patrimony, explaining why the common law trust is not a patrimony helps to illuminate not only the nature of that institution, but also the deep meaning behind the often-repeated claim that in the common law, the estate of a deceased person is not a trust, even though it involves holding property in a fiduciary capacity for the benefit of others.17 Lepaulle’s argument could be understood to claim that all trusts are purpose trusts, because the people who usually appear in the trust are not actually needed there; they are, according to Lepaulle, optional extras.18 What is needed is the goal, the destination, the affectation that is attached to the trust property.19 On a first reading, the common law jurist might think that Lepaulle was mistaken, and misunderstood the trust; and the civilian might think of his work as profoundly heretical in admitting that some rights are not necessarily subjective. On a subsequent reading, however, both jurists may start to wonder whether Lepaulle produced a profound and ­transsystemic analysis, that provides for a new way to understand rights that moves beyond our immediate thinking and borders. Translating Lepaulle involves thus more than a simple transliteration from one language to another or from one system to another; it involves taking a leap of faith regarding the trust, the patrimony, and more broadly, our understanding of the law. The following section is a translation of chapter 1 of P Lepaulle, Traité théorique et pratique des trusts en droit interne, en droit fiscal et en droit international (1932). The internal references are in the original citation form and in keeping with the abbreviations established in the original text.

16 A Popovici, L Smith, and R Tremblay (eds), Les intraduisibles en droit civil (2014). 17 See Chs 3 and 7 in this volume. 18 It is interesting to observe that at one point (see n 11 of the translation), Lepaulle signals that he changed his mind regarding the necessity of the trustee, from the position he took in an earlier text. In the Traité, while he accepted that the trustee is necessary for the functioning of a trust, he denied that one was needed for its creation or validity. 19 For comparative analysis of this concept, see the papers in the special number on affectation of (2014) 48 Revue Juridique Thémis 531-656.

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B. THE TRANSLATION P Lepaulle, A Theoretical and Practical Treatise on Trusts in Municipal Law, Tax Law, and International Law FIRST CHAPTER FEATURES, ORIGIN, NATURE AND STRUCTURE OF THE TRUST Features of the trust The word “trust” in French has taken on many different meanings and its content is usually rather vague. In order to avoid obfuscation and confusion, we must start with a description of the trust. At this point, it is not about defining the trust or providing a legal analysis thereof. It is simply a matter of describing the trust in order to provide a general idea of what it is. A property owner or a creditor called the “settlor” transfers all or part of his property or his claim to a third party who is called the “trustee”, or alternatively the “settlor” simply declares that henceforth, he will be trustee of the property of which, until then, he had full ownership or of the claims over which he had title. Whether a transfer is made or not, for there to be a trust there must be a “res”, that is, a patrimonial asset on which the trust can bear. The “res” is therefore a patrimonial right, whether it be movable or immovable, corporeal or not. It is essential not only that the trustee have a “res”; the trustee must also be told what to do with it. Without a designated mission, he is only a useless intermediary and vanishes. The mission, however, can be extremely broad and have unlimited variations. It could be simply to administer the “res” to the benefit of an individual who is called the beneficiary, cestui que trust, cestui, or c.q.t. for short. The mission can also be to maintain the existence of a charitable institution, to bring to life a new idea, to attain an ideal, to erect statues, etc. Thus one can create a trust to care for an aged domestic worker during his life, to have masses said for the repose of the soul of a deceased relative, to benefit the orphaned children of a city, to take care of dogs left behind after one’s passing, to have a monument built to the first husband of one’s wife, etc. The trustee is therefore not an administrator. He can sometimes be far less where his task is akin to that of a sequestrator. He can also often be much more. Many trusts confer on trustees considerable discretionary power: for



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example, one often finds in a trust’s constitutive act, or “trust deed”, a clause stipulating that the trustee may hand over to the son of the deceased settlor such portion of the capital as he sees fit, or may purchase “a thing” if he deems this to be good for the child. The mission goes decidedly beyond the management of a portfolio because it puts the trustee in the father’s shoes. It can go even further because, in many cases, it is the trustee himself who, given the breadth of his assignment, must determine what purpose to give to the assets he controls. For instance, Andrew Carnegie’s trust, established to promote the establishment of permanent world peace, provides that the trustee is to decide how the resources are to be used to achieve their designated purpose If the trustee cannot be considered analogous to an administrator, nor can he be assimilated to a mandatary. First of all, in many cases a trust can be created by law without there having been a “settlor” to act as mandator – a matter to which we will turn shortly. Further, once a trust is constituted, the settlor no longer holds any rights in the trust, in the absence of an express provision; he is a stranger thereto: he cannot remove the trustee, ask him for an accounting, or give him instructions. Finally, if the “res” consists of property susceptible of ownership, it is the trustee who holds this right, whose name will appear in the registries and in proceedings taken for the protection of the trust patrimony; when he contracts for the trust, he binds himself; despite this, while the trustee is necessary for the operation of the trust, he is not necessary for its existence or its validity: when the constitutive act fails to name a trustee, the trust is valid nonetheless and the court will make the nomination. The trustee has only one duty: to carry out the mission assigned to him. Achieving the goal assigned to him is not, however, at his own risk and peril: he is not an insurer; he must simply do all that a bonus paterfamilias could do in the same circumstances to achieve the purpose. But if, despite this, he does not succeed, he is not liable. If he acts correctly, he will never need to disburse his own funds. The trust creates not only valid rights among the parties – “settlor”, ­“trustee”, “cestui”; but also rights opposable to third parties. This is why the property in the trust does not form part of the pledge of the trustee’s creditors, does not pass to his heirs, and cannot be bequeathed nor gifted by the trustee; in short, the trust property is not in the trustee’s patrimony, and yet only he has the ability to sell it, lease it, or charge it with real rights. Nevertheless, the cestui can act in his personal capacity against third parties if the trustee refuses to do so, is absent, or is incapable. If the trustee takes

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advantage of his position as “owner” and fraudulently sells the “res” to a bad faith third party, the cestui can pursue either an action in revendication against the third party, or a priority claim on the proceeds of sale in the trustee’s hands. However, if the third party acted in good faith and gave value in exchange, the beneficiary loses all right of recourse against him. If one were to ask what the trust is for, we could just about reply: “everything”! The trust is more indispensable than tea to English life or baseball to American life. Do you want to protect a prodigal against his own generosity? Leave the property intended for him to a trustee with the duty of providing him with the revenue. Do you want to create an inalienable dowry? Do the same. Do you want to create a cartel? Transfer the controlling shares in several companies to a committee of trustees who will ensure coordinated management, but without retaining the dividends. Do you want to provide the equivalent of a usufruct or make a substitution? Transfer the property to X in trust for A during A’s life, with the full ownership to be transferred to B upon A’s death. Do you want to replace the occasionally inflexible insolvency rules with a system that is more adaptable, more “businesslike”? Require the debtor to transfer his stock-in-trade to a trustee who will sell it or administer it for the benefit of the creditors. Do you want to create a company while avoiding the applicable laws? The investors transfer to trustees the assets they want to pool, in trust for themselves or for the holders of securities they issue. Do you want to protect bondholders and secure them with a hypothec from the date of issue? The trust will readily replace our civil partnerships. Do you simply want to unburden yourself of the administration of your property? The trust will achieve this purpose much better than the mandate. But that is not all: the courts have sought to take advantage of the trust as individuals have; fittingly, they have ensured that this institution – so often used to evade the law and, as we will see, owing its origins to the ingeniousness of fraudsters – is also used to enforce lawfulness. From this, alongside the express trusts discussed above, was born the theory of “constructive trusts” which, despite the contradiction in terms, amount to priority claims created by court decisions. It is easy to see how the trust can serve this purpose, inasmuch as it allows for the removal of property from the patrimony of a debtor in order to affect it specifically as security for a creditor: for example, if X became the owner of a horse through illegal means that obligated him to retransfer ownership to Y, Equity would make X a “constructive trustee” for Y.1   1 Constructive trusts along with “resulting trusts” constitute the category of “implied trusts”. We do not mention “resulting trusts” in this text as they do not serve a special or independent function.



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Thus, as much from its characteristics as from the variety of its functions, the trust seems at first glance to be an original institution that cannot be assimilated to any of those known in our law. This originality finds its source and explanation in the history of the trust. Origin of the trust Some historians have attempted to show that the trust originated in the Roman fideicomissum,2 while others have sought its source in the Germanic “Treuhand” or “Salman”.3 Even if it is likely that both institutions had some influence, it seems that neither was determinative and that the deeper source of the trust lies outside the legal domain. Let us go back, then, to the time when the first trusts were created. The central authority, still young and weak, was aware of two forces opposed to its power: the religious congregations and the feudal barons. To restrain the power of the former, the monarch instituted the “statute of mortmain”, or the law of the dead hand; to maintain dominance over the latter, it confiscated the property of barons who took up arms against him. Cunning is the best response to force: the monks would secretly advise pious and charitable souls to make gifts to third parties who wanted to do good for the congregation, and the lords, before going to war against their suzerain, would cede their fiefdoms to a reliable friend. Did the monks thus have memories of some very vague lessons that they might have had in Roman law? Did the Germanic origins of the lords give them the idea of setting up a counterfeit “Treuhand”? While not absolutely impossible, this seems extremely unlikely. Importing into a country an unknown legal institution is among the most delicate and hazardous of undertakings. One never knows whether national judges will accept it and, if they do, to what extent they will deform the foreign institution; regardless, these developments have never been presented in this light and no known judicial decision speaks of it. In reality, taking into account only the clear historical facts, we find no juridical technique at the origin of the trust: when the lord, for example, transferred his property to a friend, in legal terms he became nothing at all, and he knew it! He was not seeking the protection of the law, but that of friendship; and it is not for nothing that trust means confidence! In all times and in all countries, men have – fortunately – looked beyond the legal rules, and have put the  2 Pomeroy, “On Equity, Jurisprudence and Equitable remedies” (4th edn) § 976, Story § 966.   3 On the origin of the trust, see: Ames, Select Essays on legal history, II, p. 237 and Maitland, The origin of uses, 8 Harvard Law Review, 127.

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same if not greater faith in a word of honour than in a strict legal obligation. So too have men throughout time, when circumstances were dire, confided that which was most precious to their best friend, leaving with him their final wishes: the crusaders before taking up the Cross, the Icelandic explorer prior to a great voyage, the lord before taking up arms against his suzerain, were often led to entrust their property, their wives, their children to a faithful friend who was staying close to home. They were not putting their faith in the law, but in the human heart. If such hearts were not as esteemed as they had believed, if their friends betrayed them, these men could have no recourse before the courts: the matter was settled man to man. In short, at the core of the trust lies the eternal ruse of the intermediary – a ruse as rudimentary as it is clumsy, since it amounts to putting oneself at the mercy of a straw man; it is not the ruse of a jurist who hides behind the ingeniousness of a technical construction, but the ultimate resource of those seeking in friendship the protections that the law refuses to provide. It is also a ruse than can be applied in all cases. The example of those lords who transferred their property to third parties to hold for the lords’ “use” (the “use” preceded the term “trust”) was followed by more and more variations on the theme. For instance, in order to avoid a number of feudal taxes – “relief”, “wardship”, “marriage”, etc. – owners would transfer their property in “joint tenancy” to a group of friends. This group would replace any deceased members, becoming in effect immortal, ensuring that the ownership never changed hands. The original owner of course stipulated that the “joint tenants” held the property “in use” for him.4 Did a man want to write a will at a time when it was forbidden?5 Did he want to deny his wife her dower? Or make a gift to a married woman? Avoid all the formalities for the transfer of immovable property? He established a “use”! It is easy to see why the law did not give special favour to a ruse that, on the one hand, was intended to avoid its prescriptions, and, on the other hand, contradicted the law’s basic rules, as he who was the owner under a “use” was not the owner under the “common law”. Further, the friend, “the feoffee to uses” in whom all trust was placed, feeling protected by the law, did not always pay heed to the voice of conscience; he would sometimes keep everything for himself, blatantly robbing the owner who had placed faith in him. Given that the victim of such plunder sought to illegally rob another: the treasury, his sovereign, his wife, etc., he could do nothing but keep quiet.  4 I Tiffany, “Real property”, page 200.   5 That is, until the “Statute of Wills”, 32 Henry VIII, C.I. (1540).



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But the “use” was not only about fraud: there were also cases, which became increasingly common, where people put their property “in use” for entirely respectable reasons: leaving on a distant voyage, for the benefit of an inexperienced wife, etc. In such cases, the victim of the “feoffee to uses” had no reason to remain silent: he protested against the dishonesty of his friend. Such scandals forged a shift in opinion in favour of the victims, but the question remained as to how they could be afforded a certain measure of protection. The courts were of no assistance as they embodied the “common law”, which the “use” contradicted. One could address Parliament, which is effectively what took place in 1402, but apparently to no result. The only remaining avenue was to address the King. This was possible because the Sovereign was considered to be the fount of all justice, the bearer of a residual justice (much like Saint Louis under his oak), above all courts and able to make decisions according to his conscience and to equity, without concerning himself with technical rules. The King, being all-powerful, could delegate his powers and indeed did so to his Lord Chancellor, “Keeper of the King’s Conscience”, who, given the volume of petitioners, further delegated his powers to multiple assessors, thereby constituting a hierarchy of magistrates. Given the power of tradition and precedent in England, the decisions of these magistrates quickly crystallised the “law’s conscience” into a voluminous jurisprudence. This body of case law, named “Equity” in light of its source of inspiration and its basis for decision-making, was defined for this reason by Mr Levy-Ullmann6 as: “a set of legal rules that finds it primary source not in custom or in writing, but in the imperatives of the conscience, these rules being exceptionally generated and developed by certain courts of justice, in particular that of the chancery”. It was therefore natural that victims of an unfaithful “feoffee to uses” would go before the courts of Equity, who, at the outset, being free to judge based on conscience and fairness, could, when they wished, provide relief. After long hesitating, the courts of Equity finally decided to do so in 1446.7 With the support of the courts of Equity, “uses” gained new life. Fraud also developed, however, to the extent that Henry VIII felt obliged to defend himself, and in 1536 had the “Statute of Uses” enacted. The intention of the legislator was clearly to abolish “Uses”. Indeed, the whole preamble of the Statute was devoted to enumerating their disadvantages.  6 Éléments d’introduction générale à la science juridique, vol II, p 431.   7 Ames, lectures on legal history, 237.

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1. “Uses” are, according to the Statute, a means to devise immovable property by will, which was forbidden by feudal law. 2. They ignore the formal requirements for the inter vivos transfer of ownership. 3. They allow the despoiling of the rights of: (a) the King, who loses the benefit of confiscating the property of traitors who took care to convey their property to a third party while secretly retaining the “use” thereof; (b) the Lords, who lose their rights of wardship, marriage, relief, harriot, escheat; (c) wives, who lose their dowers, and husbands, who lose their “curtesy”. 4. They create deplorable uncertainty in the sale of immovable property, as “uses” are not subject to any publicity. Despite all these disadvantages, the “Statute” did not simply make “uses” illegal, but declared further that the beneficiary would be considered as the only true owner and that he who had otherwise been considered the owner – the “feoffee to uses” – would be thenceforth completely ignored by the law. The legislator thereby respected the intention of the donor or seller as well as the respective interests of the donee or the buyer, the king, the lords, and wives and husbands, since there would be an owner of the property who would enjoy all the benefits of full ownership while being subject to the obligations attached thereto. As for the intermediary – the “feoffee to uses” – he would disappear, as he had no personal interest to be protected. In short, instead of abolishing the “use”, the statute of Henry VIII sought to give it full effect while avoiding its disadvantages. This is what is meant when the doctrine and case law routinely state that the “Statute of Uses executed the uses”. Those targeted by the “Statute of Uses” were not defeated: all those who sought to set up “uses” without fraudulent purposes, who were not contemplated in the statute, along with those who sought to continue their fraudulent activities, were united in fighting against this troublesome “statute” and in seeking the chinks in its armour. This did not take them long, helped as they were by the courts of Equity that presciently appreciated the great possibilities in developing the institution of the “use”. This is why the “Statute” was given the strictest interpretation. It was held not to cover the following “uses”: 1. Those that related to movable property. 2. Those that related to immovable property rights other than freehold.



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3. Those in which the “feoffee to uses” had positive duties of administration (active use or special use) and was not simply a screen. Clearly this distinction was not made in the text of the statute, but the case law held that the administrator could not carry out the task conferred upon him by the express will of the donor or seller without himself being the owner.8 4. Those in which a double use was created. This is what is meant: A sells a farm to B, “to the use of C, to the use of D”. It was decided in 1557, in the famous Tyrrel’s case,9 that the statute could “execute” the first “use”, but, having been spent in this operation, could not “execute” the second. As such, in the above example, the only owner of the farm in the eyes of the “Common Law” courts was C and not D. In short, as the English author Edward Jenks put it: “A statute enacted with as much pomp as solemnity, through a strict interpretation, had no effect other than to add three words: ‘to the use’ to acts of sale.”10 In these four cases (into which one could fit almost all others) the situation prior to the “Statute of Uses” was re-established. Only the names would change: the “use” became the trust, the “feoffee to uses” the trustee. The “cestui que use” became the cestui que trust! From that point forward, the trust gained an irresistible momentum and would develop both in law and in fact. In effect, given the nature of Equity and the trends of the law at the time, the trust would develop first from the remedies afforded in specific cases, and it was only afterwards, through a comparison and generalisation of the individual cases, that rights were recognised inductively. The recognition of the rights of the cestui que trust developed only little by little. It was not until modern times that attempts were first made at synthesis, and at the juridical interpretation of the trust. As these efforts led to only two theories, neither of which have been abandoned to this day, we will now examine each in turn.

  8 15 Mich L Review 89.  9 Scott, Select cases and other authorities on the law of trusts, 1st edn, 1919, p 10. 10 Jenks, A short history of English Civil law, p 100. [Translators’ note: here Lepaulle renders into French, and attributes to Jenks, a line famously uttered by Lord Hardwicke: “… a statute made upon great consideration, introduced in a solemn and pompous manner, by this strict construction, has had no other effect than to add at most, three words to a conveyance”: Hopkins v Hopkins (1738), 1 Atk 581, 591, 26 ER 365, 372. Jenks referred to Hardwicke’s dictum in Hopkins although he did not quote it (see p 101 of the 1st (1912) and 2nd (1920) editions; Lepaulle might have used a later edition).]

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Determining the nature of the trust11 In order to explain the nature of the trust in contemporary law, two theories were put forward which, while radically opposed one to the other, have in common that they reduce the question to the determination of the nature of the rights of the beneficiary. Under the first theory, the essence of the trust is the personal right of the cestui que trust with respect to the trustee, an obligational bond that ties one to the other.12 The whole of trust law could be explained by considering the cestui que trust to be, essentially, a creditor of the trustee. Only the trustee is the owner, acts with respect to third parties, acquires rights and is subject to obligations, administers property; all the beneficiary would have, in the final analysis, is a claim against the trustee, whose object and modalities would be determined by the constitutive act. That the cestui, where there is one, has personal rights is certain; however, that these rights constitute the essence, the whole of the mystery of the trust, is obviously false. Indeed, a trust can be constituted that is not for the benefit of legal subjects; it is clearly established even if the settlor failed to name a trustee. If, for example, I bequeath £10,000 in trust to have masses said for the repose of my soul, a valid trust has been created even though there is neither a trustee nor a beneficiary. The court will remedy my omission and designate a trustee. In addition, it cannot be said that the trustee stands alone with respect to third parties since on the one hand, the res is not the pledge of the trustee’s creditors and does not form part of his patrimony, and, on the other hand, a trust is validly constituted even if no trustee is designated. We can therefore conclude that the theory by which the trust is nothing more than a personal right is superficial and false. So, say those who deny the first theory,13 the trust is a division of the 11 The articles we published on this topic in the Journal de droit international privé (1927, p 966) and the Cornell Law Quarterly (1928, p 52) represent steps in the evolution of our thought and differ markedly from this section. [Translators’ note: for the full citations to Lepaulle’s earlier work, see the introductory note n 7] 12 The theory of the personal rights of the cestui que trust is maintained in particular in England by Holland (Jurisprudence, 9th edition, p 231 et seq.) and Maitland (Equity, III-155) and in America by Langdell (1 Harvard Law Review 59), Ames (Cases on trust, 2nd Edition, 244-281). Harland F Stone, Judge of the Supreme Court of the United States (17, Columbia Law Review 467). 13 The standard-bearer of the real rights theory in England is Salmond (Jurisprudence, 278-282) and in America is Roscoe Pound (26 Havard law Review 462). Huston (The enforcement of decrees in Equity 138); Scott (17 Columbia law Review 269).



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right of ownership between the cestui and the trustee; it creates a principal real right for the beneficiary, a true right of ownership that is restricted in a sense, since it does not include the right to administer, but is more favourable in another as it bestows on its titulary all the advantages of ownership, without its burdens or liabilities. This theory does not seem any more convincing than the previous one. How can the right of the cestui be in essence a real right when the “res” can be a personal right? A real right over a personal right, what a logomachy! Further, in order for there to be a division in the right of ownership, there must necessarily be two legal subjects. And yet, the singular attraction of the trust is that property can be left to realise a dream or a simple desire: we have seen that property can be left in trust for the purposes of having masses said for the repose of one’s soul, to care for dogs, to spread whatever concept of Christianity, etc. How, then, can we speak of the real right of the cestui when there is no cestui? Does such a theory, far from uncovering the core of the trust, not actually serve to negate the very value of the trust? We must go even further and say that any definition of the trust that sees it as an allocation of rights between the trustee and the cestui, or as a legal relationship trustee-cestui-settlor, is clearly false, because one cannot define the essence of an institution as a series of relationships among three people when none of those people is essential to its existence. Indeed, the settlor never exists in the constructive trust; the trustee may never have been named, with no effect on the existence or the validity of the trust; as for the beneficiary, there is none in very many trusts. We must therefore abandon the classic theories that remain stuck in history, and synthesise the elements provided by the present-day positive law. The only way to approach the question is, obviously, to seek out the elements that are essential to the formation and to the life of the trust. In this regard, there are two elements: a distinct patrimony and an affectation. These flow from the principles that will be addressed in detail in due course and that we merely set out here. First, a patrimony. This is the necessary conclusion flowing from the following principles: (a) A trust necessarily implies patrimonial rights on which it bears. One cannot simply give a trustee a mission; there must also be a direct relationship between this mission and the property entrusted to the trustee, that is the vital substance of the trust. This substance must be made of rights, and these rights can be nothing other than patrimonial.

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(b) These rights are part of no one’s patrimony. They clearly cannot remain in the settlor’s patrimony; if they did, it would simply be a mandate tied to a deposit. Nor can they fall into the trustee’s patrimony, otherwise, although there could be a gift or a legacy with a charge or a stipulation for another, there would not be a trust. Indeed, in a trust, the property is never in the patrimony of the trustee, it does not devolve to his heirs nor does it form part of the pledge of his creditors. Finally, the “res” is also not in the beneficiary’s patrimony (or else the so-called trustee would be a mandatary, testamentary executor, tutor, delegated administrator, etc., but not a trustee). Each cestui has within his patrimony only the beneficial interest. (c) These rights constitute a distinct whole. The “res” is isolated by virtue of its lack of attachment to any patrimony, thereby taking on an individuality of its own. But this individuality is accentuated in particular by the fact that this property has a guardian who is responsible for the administration thereof, and it has a charter, the trust deed, that determines its management and destination. (d) Finally, the “res” constitutes a universality. For example, a house that formed part of a trust is exchanged for fields, which in turn are exchanged for livestock, which is sold for $10,000. The trustee then purchases securities with this money, that increase in value to $60,000. The identity of the patrimony would be constant across all its successive transformations. The law seeks the identity of the patrimony across all its metamorphoses. Hence, in every trust, there is necessarily a distinct patrimony. In addition, there is an affectation. If the affectation is not specified, if it becomes impossible or illicit, or if it is realised, the trust falls.14 If we analyse this concept of affectation as set out in court decisions, what do we find? In considering express trusts, we discover two distinct elements. (1) instructions relating to the distribution of the assets are necessary; the trustee must know that, for example, he is to disburse the revenues to X for twenty years, and then a third of the capital to Y and the revenues of the other two-thirds to institution Z. Without such instructions, an affectation does not seem possible; (2) moreover, a guiding principle must be present, an essential purpose that explains why the trust was created and what aims it 14 This notion of affectation was recognised with respect to charitable trusts by M. Arminjon: De la nationalité et de l’indigénat des personnes morales dans l’Empire Ottoman (Clunet, 1902, p 712).



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seeks to achieve. To return to our example, it is critical to explain the trust in favour of X. The explanation could be, for example, the intention to protect X against her extravagance or from the influence of her husband, etc. The guiding principle is distinct from the motive. The motive is the deep psychological cause that gave rise to the intention: a desire to generate admiration, to perpetuate one’s memory, etc. The guiding principle is objective and is not related to the causes of the intention; it expands the scope thereof while generalising its meaning. Insofar as the assets can be distributed in accordance with the settlor’s instructions, the second element is of little importance. Intention and guiding principle are therefore synonymous; but they cease to be so when the instructions become impossible to carry out. Let us take two examples to explain this further: 1. A trust is constituted in favour of a church of a specific sect, the settlor dies, and the sect disappears. If we were to adhere to even the most liberal rules relating to the interpretation of intention, the trust would fall. But we do not, and the trust may be able to continue if the courts find that the deeper concept, the inspiration that guided the creation of the trust, went beyond the intention to give a gift to a specific church and embodied, for example, the intention to encourage religious conviction, to improve the morals of the country, etc. If this is the case, the patrimony will be affected to another church or even to a different undertaking that was likely to fulfill the settlor’s fundamental, if unexpressed, idea.15 2. A trust is constituted from capital whose revenues must be remitted to X for ten years, then to Y until his death, at which time the capital is to be remitted to Z; X buys out the beneficial interests of Y and Z. It would seem that the trust would have to end, just as a usufruct would upon the sale to the usufructuary of the bare ownership. This would only be the case, however, if the guiding principle was other than the protection of X against his own inexperience.16 15 See p 57 note 1 and 177 note 3. [Translators’ note: these references are to sections of the book that are not in the present translation. The first is to a note that introduces the terminology of the cy-près doctrine in charitable trusts, and suggests that this idea could well apply to all trusts as it relates to the essence of the trust. Lepaulle suggests that common lawyers do not understand this because they do not well understand the nature of the trust: “C’est d’ailleurs un point que les anglo-saxons n’ont pas bien saisi, faute d’avoir réussi à pénétrer la nature de l’institution”. The second reference is to a long footnote that further develops the argument that cy-près is part of the logic of affectation and should not be confined to charitable trusts.] 16 See p 239. [Translators’ note: this reference is to a section of the book that is not in the present translation. There, Lepaulle discusses different approaches, in English and US law, to the ability

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From this we can see that intention and affectation are not identical concepts. To affect property is to separate oneself therefrom after having, so to speak, given it a mission: it is as if one placed provisions into a servant’s bag and sent him to a faraway place, with directions on which route to take, and then closed the door once he has passed over the hill; again, an affected patrimony is a bit like a child who needs a tutor, but who will grow and develop through the perpetual renewal of the constant and unpredictable flow of life. If we move from express to “implied” trusts, however, affectation loses its intentional element. Indeed, in “constructive trusts” there is no settlor, so it can no longer be a matter of intention; and as for resulting trusts, they are automatically created by law, exactly where the settlor’s intention cannot be carried out! In such cases, the affectation is determined by court decision or by law. We can therefore conclude that the concept of affectation is a distinct one that has its own meaning, that it is something other than intention, and that it is essential to the trust throughout its life. Is there any another essential element to the life of the trust? No: as we have seen, it matters not if no trustee was designated17 or if the cestui is not a legal subject. If the necessity of a patrimony and an affectation are the only essential conditions for the creation and the life of a trust, the following conclusion is inescapable: the trust is an affected patrimony. This conclusion still does not provide us with a definition. Indeed, as several examples have shown, not all affected patrimonies are trusts. However, all of these institutions that are affected patrimonies without being trusts always have a limited affectation: a foundation cannot exist for the benefit of a particular individual; an estate in bankruptcy has a specific purpose that is the same in every case; the patrimony of someone who is declared absent is constituted as a distinct whole, for an unvarying purpose. Among all other juridical institutions, only the trust allows for a complete freedom of affectation. This is how it can replace all other institutions that constitute affected patrimonies, and how it can do many other things! Having thus discovered the unique special element that characterises the trust, we can propose the following definition: the trust is a juridical institution that consists of a patrimony independent of any legal subject, the unity of which is defined by an affectation that is free, within the bounds of of beneficiaries to bring a trust to an early end, and sketches (p 240) an argument for reconciling those approaches.] 17 If the settlor has not designated a trustee, the court will name one.



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applicable law and public order. This definition seems immediately to raise an objection of principle which we will now examine. The following critique could be levelled: “how can the concepts of personality and patrimony be dissociated, since patrimony is traditionally defined in terms of personality?” Three replies to this argument are possible: (a) It is not true that Anglo-Saxon law defines patrimony in this manner; indeed, it never considered combining these two concepts. (b) The dissociation of the two is nearly a fait accompli in French doctrine, which is abandoning the traditional theory more and more.18 (c) Positive Law recognises many institutions that are patrimonies without being legal persons: foundations, fiducie, property of absentees after having been placed under administration, unclaimed successions or those accepted under benefit of inventory, estates in bankruptcy, undeclared partnerships, etc.19 If these varied institutions were examined, the juridical explanations that have been given for them do not stand up to scrutiny20 without reference to the concept of patrimony by appropriation. It is for this reason that the most modern doctrinal writers and courts have used such a concept to account for these institutions. The fact remains that the classical theory ties the concept of patrimony to that of personality. We must therefore show that there is no necessary link between the two. Classical doctrine begins with the basic idea of the legal relationship, and reasons as follows: a legal relationship presupposes a subject and an object. A right (that is, a subjective right) is no more than a power that a subject exerts over an object; as a result, there is no right without a subject. A legal subject is a person, within which we can distinguish two elements: will and interest. The classic doctrine gives great weight to the element of will. As a result, only persons can have rights. On the passive side of the legal relationship – the obligation – we see 18 Geny, Méthodes d’interprétation et sources en droit privé positif, 2nd edn, p 126. – La Felles, De l’idée de la continuation de la personne, Thesis, Paris, 1905, p 966. – H Gazin, Essai critique sur la notion de patrimonine dans la doctrine classique, Thesis, Dijon, 1910. – Demogue, Notions fondamentales, p 383 – Planiol and Ripert, v III, (M Picard), chapter 1. 19 See Planiol and Ripert, Droit Civil. Treatise by M Picard on Biens, chapter 1 and notes to chapter 2. 20 In order to avoid repetition, we ask the reader to indulge this bare assertion for the time being; a brief discussion thereof follows in the next chapter.

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again that only a person can be the subject thereof, as an obligation also presupposes will and interest. A patrimony is the aggregate of the rights and obligations of a person. It is therefore strictly personal in nature. The second idea inherent in the notion of patrimony is that of u ­ niversality, that is, the cohesion of its various elements into a whole. This cohesion flows logically from the preceding idea: that which unites these rights and obligations into a whole is their connection to a single legal subject. From this, then, comes the idea of the indivisibility of the patrimony and its consequences: 1. General right of the pledge of creditors. 2. Transfer of liabilities when transferring by general title. 3. Real subrogation (in judiciis universalibus res succedit loco pretii et pretium loco rei). This is the dogmatic formulation of the doctrine. It is clear, however, that the historical process was the inverse: what emerged first was the idea of appropriation and the right of ownership as a basic real right, followed by the strictly personal obligation unconnected to patrimonial assets. Next the idea of patrimony (bona) was born with the rise of enforcement against property (venditio bonorum), and finally came the notion of the patrimony as a legal universality, a mass of assets and liabilities, which arose with the transfer of debts upon death (continuation of the person). This doctrine of the patrimony as personal and indivisible has been strongly criticised, inasmuch, at least, as it purports to give its deductions an objective reality.21 Indeed, it had to rely on fictions and admit anomalies in order to explain legal realities. Thus, especially with respect to the theory of legal persons, there is no denying that in this case, it is the application of a juridical technique that explains the existence of patrimonies that are not attached to a physically personified legal subject. The fiction doctrine had the honesty to admit as much. The “reality” doctrine had to rely on metaphysical notions of “collective will” that did not square with the legal understanding of will. Even allowing for necessary and “biological” human groupings, there is no way to deduce a collective will. The problem at the core of this doctrine comes from its very premise. 21 Geny, Méthode d’interprétation. – Jallu, Essai critique sur l’idée de continuation de la personne, Thesis, Paris, 1902.



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The concept of a legal subject that is the cornerstone of this doctrine is no more than a juridical technique, and taking it literally is a mistake. If the object of law is human relations, then it is human interests that it aims to protect. What characterises the legal subject is the interest that needs to be protected. Will enters into the equation only upon the exercise or realisation of the right. In fact, in legal reality, we can see examples of the dissociation of these two ideas of the interest to be protected and the will that protects it. Such is the case for incapables (children, the insane). The interest being protected is that of an individual who lacks a will. Their right exists, but its exercise is given over to another’s will.22 The legal person can provide a further example. The interest to be protected is that of a collectivity, distinct from the interests of each of the individual members. (The courts have been clear on the matter: the interest to be protected is not of the dominant group in a collective, but that of the collective itself, of the social enterprise.) As for the will, it is expressed by the appropriate organs which are subject to judicial control as required. Donations or legacies with charges provide yet another example, when the charge absorbs the whole liberality. Under the classic theory, the legal subject is the donee. But, given current conceptions, it is clear that this is merely a technique for achieving the desired purpose: the interest at stake is that of the beneficiaries of the donation; the donee is there simply to put it into practice. The same can be said of some stipulations for another (for example, life insurance for the benefit of children born or unborn). 22 Is it not also striking that the authors of the theory of subjective affectation drew a distinction between “Genuss” and “Verfügung”, which corresponds surprisingly to the distinction established between the rights of the trustee and those of the cestui? These authors state that there are two types of rights: those that correspond to a protected interest, and those that permit the exercise of power and action in order to allow another the eventual enjoyment of a thing. Thus, the right of ownership of a newborn is a right in the first category since the benefit of this ownership must, as circumstances warrant, eventually go to the child or his successor. And yet, the newborn child – and a fortiori the newly conceived child – has no will of its own. In contrast, the rights exercised by a tutor over the property of a minor fit into the second category: they correspond with the powers that a tutor may exercise, although not in his personal interest, for an enjoyment of some sort: in order to be the titulary of such a right, one must have a will. What we have said of the minor and the tutor can undoubtedly be said, even more justly, of the trust. A trustee must have a will for obvious reasons, as he must act in order to make the trust work; however, there is no denying that the cestui need not have a will, as the cestui can be anything from world peace, to progress, to a funeral monument, to the soul of a deceased!

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This dissociation remained acceptable in primitive legal systems, where the only interests to protect were material and were ultimately related to existing physical persons. The complexity of relations and interests in more sophisticated societies gives rise to, on the one hand, collective interests and, on the other, purely spiritual interests, unrelated to any specific person or group. The concept of the legal subject cannot here apply. As Jhering and Windscheid state, the site of a subjective right is not a subject, but a goal or a destination23 and Windscheid applies this to the theory of legal persons, stating: “The legal person is the bearer of an independent goal, of a goal that is not that of a determinate person.” If we accept this conception of subjective rights, we are forced to reimagine the concept of patrimony. The idea of absolute personality disappears insofar as the interests to be protected are not those of an individual. What patrimonies must the law protect?24 Answering this question is a matter of interpreting social facts, which could easily be done by replacing the category of the subject of patrimonies with the idea of the affectation of patrimonies. There would thus be, first, the individual patrimony, affected to the satisfaction of the individual’s needs and responding to his economic activity; a patrimony that would be under the protection of the law, as a representation of the will of man. Secondly, in society we find collective patrimonies that merit protection in the interest of humanity, so long as they have an organisation that provides for a will to represent them. Finally, we must recognise specialised patrimonies that have an organisation created by the will of the one who gave them a special affectation.

As for the concept of universality, its consequences would be the same as before, but it would have a different basis. As Jallu has noted,25 “the idea of the patrimony was born with the concept of credit, the day the burden of the obligation moved from the person onto the property. Without credit, patrimony is meaningless.” The idea of the universality of the patrimony is a response to this rather simple idea, namely that the entirety of property and rights affected to a purpose (individual, collective, or special) is encumbered with charges and obligations contracted for this same purpose. This principle explains the three legal realities for which the concept of patrimony was created: (1) the general pledge of creditors; (2) the transfer

23 Windscheid, Pandectes, edited by Kipp, 1 § 49, p 188. 24 Platara, La notion juridique de patrimoine, Thesis, Paris 1903. 25 Op cit, p 95.



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of liabilities in cases of transfer by general title. (The obligation of ultra vires heirs arises out of the consideration that in the absence of an inventory, there is a factual confusion of the patrimonies);26 (3) real subrogation. It is clear that, under this new conception, the affected patrimony easily takes its proper place. From the moment that a distinct purpose exists for a mass of property, and that this purpose is legitimated by a direct or indirect interest requiring protection, there is a need for a distinct patrimony. Specialised patrimonies27 are legal universalities belonging to their own destination. They have no subject, or at least do not appear to have any, as it is effectively the property that composes them or the purpose for which they are affected that play the role thereof.

Here we have a patrimony that is deprived of any possibility, even in theory, of will. There are simply interests to be protected or, as Bekker states,28 the faculty of enjoyment (Genuss). As for the will required to put this enjoyment into action, it is provided either by the creator or by a means of selection provided by law. When affected patrimonies (Zweckvermögen) are provided with a regulated organisation (Satzung) designed by the will that created the patrimony, the law must take this into consideration. In other words, affected patrimonies presuppose the regulation of their affectation (Zwecksatzungen), that is, they are merely regulated patrimonies formed by declarations of will.29

It must be concluded that, along with the majority of modern doctrine, the concept of an affected patrimony that is independent of any legal subject is coherent and logical, and that it is the only way to account for a number of legal institutions.30 We can therefore now define patrimony, modifying slightly the definition offered by Mr Picard,31 as an aggregate of rights and liabilities, having pecuniary value, and forming a legal universality. Structure of the trust This definition leads to a number of corollaries that must now be set out in order to make out the structure of the trust.

26 Of course, this conception is contrary to historical truth. 27 Sondervernögen. Zweckvermögen. 28 “Zum Lehre vom Rechtssubject, Genuss und Verfuegung”, Revue de Ihering, 1873. 29 Bekker, op cit. 30 It must be noted that under modern doctrine each individual must nonetheless have a patrimony. 31 Planiol and Ripert, Traité de M. Picard sur le Biens, chap 1, p 19.

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I – The affectation of property can only be realised through a will. Obviously, an affectation does not operate on its own. A trust is akin to a Punch and Judy puppet that owes its life to the operator’s hand. For this reason, even if the trustee is not essential for the legal birth of a trust, the trustee is indispensable for its operation. In other words, the rights that compose the trust patrimony must be exercised, which can only be done through someone’s will. The courts have repeatedly stated that this will must come from a legal subject for it to be recognised. This is not exactly right since, as we have stated, that which characterises the legal subject is interest and not will. This is why the courts have allowed a group of individuals, not imbued with legal personality, to constitute a body of trustees who make decisions by majority vote. The trust could not work if the trustee did not have an obligation to achieve the affectation. This obligation must be either that of a legal subject, or that of another affected patrimony. Therefore, not only can an individual or a partnership be a trustee, but, logically, so too can another trust. The obligation of the trustee is primarily to properly manage the patrimony and then to achieve its affectation. When the trustee, for example, has collected rents, he must distribute these funds in accordance with the instructions received. Let us suppose that the trust is settled “to apply, for the education of the minor son of the testator, as much of the revenues as the trustee sees fit, and to apply the remainder of the revenues and the capital, upon the majority of the son, to such charitable institution in the city as the trustee deems most worthy.” In this case, it would be the duty of the trustee to evaluate the character, intelligence, and habits of the child, to prepare for the child’s future and, once the child reaches the age of majority, to evaluate the respective merits of the various institutions eligible, under the constitutive act, to receive the legacy. In summary, the affectation of the patrimony is possible only through the will of a trustee. II – The obligations of the trustee are to the trust and not to the cestui. If the obligations of the trustee are not owed to the settlor, are they owed to the cestui? That is the general assumption; we believe this to be a theoretical error.32 32 That, however, has no practical impact.



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It is necessary to explain to whom the trustee’s obligations are owed in all cases: to find, for all trusts, a creditor of the trustee’s obligations, since an obligation without a bond and without a creditor is a contradiction in terms. But how could we explain, using the classic theory, charitable trusts, trusts for the saying of masses, trusts to erect monuments, to commemorate anniversaries, etc.? How can we find a bond to a cestui that is a dream, an ideal, or a deceased’s soul? How do we build a bridge when one of its supports rests upon a cloud, as the cestui is neither a legal subject nor a patrimony? How can we see a legal bond between the trustee and the cestui when the trustee has the obligation to choose who will be the cestui (as in a trust set up by the settlor for family members deemed most worthy by the trustee, etc.)? When the trustee is obliged to provide the cestui who is a minor a share of the revenues sufficient for his best interests, and to remit to him the capital upon his reaching the age of majority, to whom does the trustee owe the obligation not to give too much to the minor? Finally, when the cestui acts against the trustee, his claim is not measured by his personal interest, but by the rights of the trust as a whole, which proves that he is not acting on his own behalf, but on behalf of the trust. We could go on with further examples! So, if the essence of the trustee’s obligation is not located in a legal relationship: trustee-cestui, where does it reside? There must be a creditor! We are therefore left with no choice: it must be the trust itself. All the obligations of the trustee, so multiple and so elusive, whether they be for the cestuis or to protect the cestuis from themselves, are owed to the trust: the only reality that is before him in all cases. What do we mean when we say that the trust is the creditor of the trustee’s obligations? Are we not returning to the concept of the trust as legal person? Not at all! We are simply saying that once the trustee has accepted his office, the trust patrimony immediately assumes all the rights that correspond to these obligations. As such, the trustee becomes the guardian of the rights that the trust has against him, and this is why the institution is called “trust”! We have seen, however, that the history of the trust has made the trustee’s virtue subject to safeguards that have over time increased in number and strength. III – The right of the cestui is a claim against the trust and not against the trustee. We have seen that the nature of the rights of the cestui are controversial and have led to much confusion. It is however essential to unravel the situation in order to understand the nature of the relationships involved in the trust.

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If the trust is an affected patrimony, the cestui cannot, in any case, have a real right on the “res”. For example, I am the owner of a house; I put this house in trust for my son; it is thus the full ownership, unaltered, that I constitute as a distinct patrimony, meaning there is no room for any other real right in addition to full ownership! The situation is identical were I to place a usufruct in trust, while assigning the bare ownership to a third party. If the cestui has no real right, he can only have a personal right, that is, a claim. Against whom does this claim exist? It cannot be against the trustee, whose obligations, as we just discussed, are to the trust. The beneficiary is therefore necessarily the creditor of the trust for all the prestations that must be provided to him; undoubtedly, the trustee is obliged to guarantee the performance of these prestations; yet the claim does not lie against him, as the claim exists even if no trustee is named. This claim is the essential element in the cestui’s patrimony generated by the trust. Naturally, if the claim is not paid according to its terms, the cestui has at his disposal all the means that civil procedure has created to protect the claim.33 The cestui’s claim is not a set amount but a share of the revenue or the capital of the “res”. This creates a situation in which the creditor, on the one hand, is interested in the best possible management of the patrimony of his debtor (the “res”) and, on the other hand, is only able to determine the amount of his claim through an examination of his debtor’s accounts. As a result, the nature of the right of the cestui generally has two consequences: (a) a right to supervise and control the administration of the trust; (b) a generous range of oblique actions that will allow the cestui to exercise all the recourses of his debtor (the trust), whether against the trustee or against third parties, for any failing of the debtor himself, that is, in fact, for any failing of the trustee. IV – Unilateral will may be legally valid in the case of express trusts. This is a direct consequence of the fact that the trust does not necessarily create legal relationships between persons. A settlor can set up a trust by his unilateral will, as he does not transfer his property to another legal subject. If the trust is affected to a general purpose and no trustee is named, it is entirely clear that the only will expressed is that of the settlor.

33 This will be, naturally, a proceeding in Equity.



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As for the obligations of the trustee, they arise from his acceptance; but this acceptance is not in principle necessary for the constitution of the trust and is independent of its establishment. The obligations of the trustee therefore do not arise out of the meeting of two minds. The cestui and the trustee must undoubtedly accept the trust; here we do have two manifestations of will, but they cannot be construed as a contract for the following reasons: first, their content differs; secondly, they are independent because, on the one hand, cestuis accept a trust once and for all without the need for any new manifestation of will upon each change of trustee and, on the other hand, they can accept a trust even without knowing who the trustee will be. It is in reality the trust that they accept. Further, as the trust is born prior to its acceptance by the cestuis, an agreement between the settlor and the beneficiary is in no way a condition of the existence of the trust. V – The trust must have a domicile and a nationality. One could be tempted to object that these two concepts presuppose the existence of a legal subject: that the domicile is the principal place of establishment of a juridical person, and that nationality is a political and legal relationship linking a person to a State. A similar argument was put forward to claim that companies could not have nationality. The failure of this argument is a testament to its value. While nationality and domicile certainly are of consequence to an individual, they also affect his patrimony. Where there is a patrimony without an individual, how are we to prevent the attribution of a nationality from which would flow all legal consequences relating to patrimonial rights and the exercise thereof? Indeed, we have no choice: because we recognise in law the existence of trusts, we must give them, and other affected patrimonies, domicile and nationality. As long as we considered the patrimony as being necessarily attached to the person, we could conclude that only persons were capable of having a domicile and nationality; however, as we must admit that affected patrimonies exist, independent of any legal subject, and as domicile and nationality have clear consequences on patrimonial rights and their sanction, we cannot escape the conclusion that affected patrimonies must have a domicile and a nationality. As we are leaving aside all procedural questions, we will not discuss all of the applications of the theory of domicile of trusts; we will see, however, that it is that theory which determines the applicable law with respect to the administration of the trust. In addition, having a sense of the importance of

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this notion, legislation often prohibits the trustee from changing the domicile of the trust without seeking authorisation from the courts. The domicile of the trust is the place of its administration. It is therefore not necessarily the same as that of the trustee. If, for example, a trustee lives in New Jersey and has his offices in New York, the domicile of the trustee is New Jersey and that of the trust is New York. This notion of domicile is beginning to be elaborated. It is present everywhere, its influence is taking many shapes, and yet doctrine has not yet managed to develop it clearly. As for nationality, three solutions are, a priori, possible: we can give the trust the nationality of the beneficiaries, that of the trustee, or that of the State of the domicile of the trust. We could argue in favour of the first theory by saying that the real interests at stake are those of the cestuis and that this solution would align with some of the modern court decisions relating to the nationality of companies. We believe, however, that it should be rejected as it would frequently be impossible to apply. Many trusts are settled for the benefit of multiple cestuis; some commercial trusts are settled to the benefit of certificate bearers that circulate in a manner similar to our bearer bonds, to the extent that it is sometimes difficult to determine who are the beneficiaries; finally, other trusts are settled to achieve general purposes. How, for example, using this theory, are we to determine the nationality of the trust settled by Carnegie for the purpose of establishing permanent world peace? We could argue in favour of the second theory by saying that the trustee always acts for the trust, making this a simple and clear criterion. We would respond, however, that the trustee is substantially only an executory agent, and it would be completely abnormal for the trust to take on the trustee’s nationality. Further, the person – and therefore the nationality – of the trustee can change many times over the life of a trust. We have to adopt the third solution for several reasons: it aligns with the most recent court decisions with respect to companies; it eliminates any conflict of laws that could arise between the law of the nationality and that of the domicile; it results, in most cases, in identical nationalities for both the trust and the trustee; and, finally, it is consistent, since it seems most logical to determine nationality with respect to patrimonial rights by reference to the location of the patrimonial interests. This seems, moreover, to be the solution adopted in Anglo-Saxon law. Here again, we are faced with a concept that is only starting to develop; however, it is already fairly clearly elaborated as trusts have, in principle, the



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same legal protections under the Federal constitution (section 4, subsection 2, paragraph 1) as those afforded to citizens.34 In summary, we reach the following conclusions: the trust is an affected patrimony, not a legal person. We can see, in fact, that rights have two ways of being: either they belong to a legal person, or they are affected, so that legal person and affectation are like the two foci of the ellipse that encloses the whole juridical plan. Affectation, in the trust, is accomplished through a will: that of the trustee who, having accepted the mission, becomes subject to the obligation to do all that is necessary to ensure its accomplishment. The rights that correspond to the trustee’s obligations form a bundle that augments the trust patrimony and become a weapon that interested parties can use to ensure the respect of the trust by a defective trustee. As such, the trust can smoothly and easily be integrated into our legal system, in which the idea of the legal subject undoubtedly plays an important role, but which, in the end, is nothing more than a convenient technique that is justified only insofar as it is useful. To these essential elements of the trust we must add one more that, in reality, is extrinsic, but that must be kept in mind at all times: the trustee, in entering into juridical acts with third parties, in principle binds himself personally. He is therefore in a situation similar to that of the partner who is deemed to contract a personal obligation each time he acts for the partnership. In this regard, however, the trust demonstrates greater flexibility than our general partnership, since the trustee, when he contracts with third parties, may stipulate that his personal liability is not engaged.

34 Hemphill v Orloff, 213, N.W., 867, and 41, H.L.R., 86.

3  Trust and Patrimony* Lionel D Smith**

A. INTRODUCTION B. IS THE COMMON LAW TRUST A PATRIMONY? (1) Lepaulle’s theory (2) Creditors of trustees in a common law trust (3) Beneficiaries of a common law trust C. CONCLUSION: TRUST AND PERSONALITY

42 43 43 47 50 55

A. INTRODUCTION The trust is one of the characteristic features of the common law t­radition, but it is not confined to the common law world. An established law of trusts, combined with a civilian understanding of property law, is found in a number of jurisdictions, including both mixed jurisdictions and pure civil law ­systems.1 It is clearly possible to have “trusts without Equity”.2 In this paper, I will attempt to show that the way in which these jurisdictions u ­ nderstand the trust can help common lawyers to understand better their own trust

* This article was originally published in (2008) 38 RGD 379. ** James McGill Professor and Director, Paul-André Crépeau Centre for Private and Comparative Law, Faculty of Law, McGill University. [Editor’s note: Lionel D Smith is currently Sir William C Macdonald Professor of Law, Faculty of Law, McGill University; Researcher, Paul-André Crépeau Centre for Private and Comparative Law; Professor of Private Law, Dickson Poon School of Law, King’s College London.]   1 To what extent trusts existed in continental Europe during the ius commune period, or earlier, are large and contentious questions that are not pursued here. The point of reference is now R Helmholz and R Zimmermann (eds), Itinera Fiduciae: Trust and Treuhand in Historical Perspective (1998). It is timely to mention the amendment of the French Code civil in February 2007 to create a fiducie: arts 2011 ff.   2 G L Gretton, “Trusts without equity”, Ch 5 below. See also T Honoré, “Obstacles to the reception of the trust? The examples of South Africa and Scotland”, in A M Rabello (ed), Aequitas and Equity: Equity in Civil Law and Mixed Jurisdictions (1997) 793, and T Honoré, “Trusts: the inessentials”, in J Getzler (ed), Rationalizing Property, Equity and Trusts: Essays in Honour of Edward Burn (2003) 7.



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i­nstitution. This often happens when we look at our law “­outside-in”; that is, when we try to see it with the eyes of others.3 The main part of this paper is devoted to asking whether the common law trust can be understood as a patrimony in the civilian sense. Contrary to the position taken by the French jurist Pierre Lepaulle, I show that it cannot. The reasons why it cannot be so understood require us to take careful note of several features of the common law trust that are not always noticed even by common lawyers. The essence of the common law trust lies not in any division of ownership of the trust property; this is a metaphor that is as likely to confuse as it is to enlighten. Rather it lies in the fact that the trust beneficiaries hold rights in the rights that the trustee holds as trust property. In the conclusion, I relate the trust institution to the idea of legal personality. The common law trust is not a legal person; I argue that it would be a mistake for any legal system to conceptualise the trust as a legal person, since the result will only be to eliminate the trust as a fundamental legal institution. B. IS THE COMMON LAW TRUST A PATRIMONY? (1) Lepaulle’s theory One of the most famous outside-in looks at the common law trust was that of Pierre Lepaulle.4 He concluded that the common law trust could best be understood, in civilian terms, as a patrimony affected to a destination or purpose. Lepaulle’s understanding of the common law trust was this: le trust est une institution juridique qui consiste en un patrimoine indépendant de tout sujet de droit et dont l’unité est constituée par une affectation qui est libre dans les limites des lois en vigueur et de l’ordre public.5

This theory has been very influential. In Mexico, it directly influenced the drafting of the trust institution that was created by statute in 1932, replacing

  3 N Kasirer, “English private law, outside-in” (2003) 3 OUCLJ 249; P Matthews, “From obligation to property, and back again? The future of the non-charitable purpose trust”, in D J Hayton (ed), Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (2002) 203 at 204: “The spectator, as they say, sees more of the game”. Pages 213-216 of Matthews’ chapter were one of the inspirations for the present paper, as was Gretton’s paper cited in the previous note.  4 P Lepaulle, Traité théorique et pratique des trusts en droit interne, en droit fiscal et en droit international (1932). Indeed an earlier work was P Lepaulle, “An outsider’s view point of the nature of trusts” (1928) 14 Cornell LQ 52. [Editor’s note: Ch 2 above provides an English translation of the first chapter of Lepaulle’s Traité.]  5 Lepaulle, Traité (n 4) 31 (italics in original).

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an earlier kind of trust that was premised on irrevocable mandate.6 Its influence is also seen in the Civil Code of Québec.7 Most recently, it can be seen in the trust that has just been created in French law.8 This section of the present paper asks whether Lepaulle’s analysis is accurate as a description of the common law trust. The conclusion is that it is not accurate. Lepaulle’s book is full of interesting insights, and his writing style is magnificent; but he made some mistakes about the common law. Even so, the way in which his view does not work actually helps us to see something about the common law trust that common lawyers do not always notice. The idea of patrimony is not, as such, known to the common law. That does not present any problem, because our goal is to determine whether the common law trust can be understood, through civilian eyes, as a patrimony. “Patrimony” has been defined as “the whole of the rights and obligations of a person having economic or pecuniary value”.9 A patrimony is, in a sense, a container; it may be empty, as might be the patrimony of a newborn baby.10 In the technical sense of the word, however, a patrimony must be

  6 Law of 28 June 1932, Ley General de Instituciones de Crédito, arts 346 ff; since 2000, Ley General de Títulos y Operaciones de Crédito, arts 381 ff. For Lepaulle’s influence, see R Batiza, “The evolution of the fideicomiso (trust) concept under Mexican law” (1958) 11 Miami LQ 478, and especially R Molina Pasquel, “The Mexican fideicomiso: the reception, evolution and present status of the common law trust in a civil law country” (1969) 8 Colum J Transnat L 54.   7 Art 1261: “The trust patrimony, consisting of the property transferred in trust, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary and in which none of them has any real right”. The juridical analysis of the Quebec trust was contentious under the very different provisions of the Civil Code of Lower Canada, in force until the end of 1993. This point will be addressed briefly in the conclusion below.  8 The Code civil, as modified by Law No 2007-211 of 19 February 2007, does not use language directly reminiscent of Lepaulle’s idea. The definitional art 2011 provides: “La fiducie est l’opération par laquelle un ou plusieurs constituants transfèrent des biens, des droits ou des sûretés, ou un ensemble de biens, de droits ou de sûretés, présents ou futurs, à un ou plusieurs fiduciaires qui, les tenant séparés de leur patrimoine propre, agissent dans un but déterminé au profit d’un ou plusieurs bénéficiaires”. Note however the language of art 12 of the Law No 2007211 of 19 February 2007, which provides in part: “Les éléments d’actif et de passif transférés dans le cadre de l’opération mentionnée à l’article 2011 du Code civil forment un patrimoine d’affectation”. Whether or not this is undermined by other provisions (such as Code civil, arts 2025, 2029) is beyond the scope of this paper.   9 Quebec Research Centre of Private and Comparative Law, Private Law Dictionary (1991), sv “patrimony”. Lepaulle’s own definition in the Traité (n 4) 40 was “un ensemble de droits et de charges appréciables en argent et formant une universalité de droit”. The word “universality” is often used in connection with the idea of patrimony; it is apt to capture the idea that the focus is on the container, not the contents. See Gretton (n 2) at 103, noting that in Roman law, “universitas meant a group, considered as a unity”. 10 Every person, even a newborn, has various non-pecuniary rights, such as the right to bodily integrity; these are extrapatrimonial.



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capable of containing both assets (pecuniary rights) and liabilities.11 The assets are available to answer to the liabilities, and in this way the general principle that a person can have only one patrimony serves in part to support the principle that it should not generally be possible to shield assets from creditors.12 How was Lepaulle led to the claim that the common law trust is a patrimony by appropriation? He wanted to identify what was essential about trusts.13 He proceeded by stripping away what he thought was inessential. In most trusts, there are people involved; we typically envisage a settlor, one or more trustees, and one or more beneficiaries. Lepaulle argued that none of these characters was essential. He claimed that in a constructive trust, there is no settlor. He claimed that in a charitable trust, there is no beneficiary; there is only the impersonal charitable purpose. Finally, he pointed to the principle that “a trust will not fail for the want of a trustee”, and from it he concluded that the trustee is also not an essential character in the common law trust. Here, I think, he misunderstood the law. Although a trust will not usually fail for the want of a trustee, there is no such thing as a common law trust without a trustee.14 Ultimately, a common law trust is a way in which a person holds property; both the property and the person holding it in trust are absolutely essential to the common law trust. The principle that a trust will not fail for the want of a trustee is the obverse of the idea that trusteeship is usually not personal but official, which is one of the essential differences between trust and contract. The official character of trusteeship means that once a trust is established inter vivos, the death or incapacity of the trustee does not end the trust. A new trustee will be found, either pursuant to machinery in the terms of the trust, or by a court order; and the trust will continue.15 Similarly, if a trust is established in a will, and the named 11 The word is sometimes used in a sense that includes only assets; even the Civil Code of Québec partakes of this usage, for example in the provisions on the “family patrimony” (arts 414 ff); but this is a non-technical sense. 12 See J Beaulne, Droit des fiducies, 2nd edn (2005) 28-29. 13 Lepaulle, Traité (n 4) 23-31. 14 Moreover, some express trusts will fail for want of a trustee, if the settlor made it clear that the identity of his or her chosen trustee(s) was essential to the trust: Re Lysaght [1966] Ch 191 at 207. This is one of many proofs of the underlying obligational character of the common law trust, to which we will return in more detail below. 15 It may be possible, however, that for some period of time the trust property is held on different trusts. Consider the example of the sole trustee who loses legal capacity. When a new trustee is appointed and the property is transferred to him or her, he or she will hold on the original trusts. But what is the situation during the time between the loss of capacity and the appointment of the new trustee? The incapable trustee holds on a kind of trust; if he died, the property would not form part of his estate. But since the trustee is now incapacitated, we cannot say that he owes

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trustee is unable or unwilling to act, a new trustee will be found one way or another.16 But this does not mean that we can sensibly discuss the idea of a trust without a trustee. There cannot be a trust without trust property, and in the common law, for reasons that will be explored more fully below, property is only trust property if it is held in trust by a trustee. Having made this mistake, however, Lepaulle thought that he had shown that none of the settlor, the trustee or the beneficiary was essential to the common law trust. What was left? He argued that the only things that were essential were that there was a patrimony, and that it be affected or appropriated to a purpose. In his understanding, affectation to a purpose was an alternative to saying that the rights and obligations in the patrimony belonged to a person or to a sujet de droit.17 That had to be the case, because he wanted to imagine a trust without any trustee. Although the trustee is essential in the common law trust, we might nonetheless consider whether Lepaulle’s idea is still a useful one, with some modification. In the common law trust, the trust assets belong to the trustee; but, as everyone knows, they are not available to the personal creditors of the trustee, nor do they form part of his estate if he should die. Can the common law trust be understood as a separate patrimony, of which the trustee is the titulary? This is the dominant understanding of the trust in Scots law.18 A trustee has his own private or general patrimony, containing his personal wealth and his personal liabilities. He also holds a special or trust patrimony, in which are found the assets of the trust and its liabilities. His personal creditors thus have access to the personal assets but not the trust assets, while trust creditors have access to the trust assets but not the personal assets. “Trust creditors” here means creditors who interact with the trustee in his capacity as trustee. For example, if he holds immovable property in trust, and he lawfully contracts for the installation of a new roof, the unpaid roofer is a trust creditor. The trust beneficiaries are also trust creditors, though they could also be personal creditors of the trustee.19 One implication of this is that when all of the trust obligations that he originally undertook. During this time, the property is held in trust, but no one holds on the terms of the original trusts. See further L Smith, “Unravelling proprietary restitution” (2004) 40 CBLJ 317. 16 Again, however, until a trustee is found, it may be that no one holds on the trusts set out in the will, in the sense that no one is obliged to carry out the terms of that trust. This was overlooked by Lepaulle, Traité (n 4) 24. 17 Lepaulle, Traité (n 4) 50. We will return to this in the conclusion. 18 K G C Reid, “Patrimony not equity: the trust in Scotland”, Ch 6 below; Gretton (n 2); Discussion Paper on The Nature and the Constitution of Trusts (Scot Law Com DP No 133, 2006) 10-13. 19 Gretton (n 2) at 100-101. The beneficiaries are trust creditors in respect of their rights to receive trust property under the terms of the trust. If the trustee committed a breach of trust,



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a trustee retires and is succeeded by another, the successor succeeds to the whole trust patrimony, both assets and liabilities. In other words, the retiring trustee is liberated of liability to trust creditors.20 (2) Creditors of trustees in a common law trust When we look at the common law trust, this analysis may seem promising at the level of trust assets, because the trustee’s personal creditors have no access to the trust assets. In other words, the trustee is clearly seen to hold assets in separate “boxes”. But something strange appears when we bring trust liabilities into the picture. Let us again assume that our trustee holds a fee simple estate in trust and, acting properly in pursuance of his duties, contracts for the installation of a new roof. The roofer is a trust creditor. What we see in the common law, however, is that this creditor, just like a personal creditor of the trustee, has no direct access to the trust assets. Let us assume everything goes well. Either the trustee pays the roofer out of the trust assets, perhaps writing a cheque on a bank account held in trust; or, the trustee pays out of his own assets, and then, as is his right, reimburses himself out of trust assets. This shows us that the trustee can direct trust assets towards the trust creditor. Now assume things do not go well: the roofer does not get paid. In the common law, he must sue the trustee. Moreover, he does not sue him “as trustee”. Trustees are not understood to have a “trust capacity”. He just sues him. If the roofer gets a judgment, it is not a judgment against the trustee “as trustee”; it is just against the trustee. And, most revealingly, if the roofer comes to execute upon his judgment, he has no more right than would a personal creditor of the trustee to execute the judgment against the trust assets.21 What we see, in other words, is that all of the trustee’s liabilities (both personal and trust liabilities) are liabilities of his own personal patrimony. This does not mean, of course, that he must personally pay for the new roof. As we have seen, the trustee generally has the right to apply trust property to properly incurred trust expenses; if he does spend his own money on such expenses, he has the right to reimburse himself out of trust assets;22 and indeed he enjoys a lien over the trust property as against the b ­ eneficiaries leading to a loss of trust assets, the beneficiaries would have a claim for compensation against the trustee’s personal assets. 20 Gretton (n 2) at 106. 21 Jennings v Mather [1902] 1 KB 1 (CA). 22 In principle, it would normally be possible to exclude such a right in the trust deed. Some Trustee Acts appear to foreclose this unlikely possibility.

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for this purpose.23 He may also have a personal right of indemnity, extending beyond the trust assets, against the trust beneficiaries in certain situations.24 So the creditor, whether a trust creditor or not, has no direct claim against the trust assets but only against the trustee’s personal assets. But in some cases, the trustee’s personal assets might be inadequate. In others, it might be the case that the creditor, if he is a consensual creditor, has expressly agreed with the trustee that the creditor’s only rights will be against trust assets and not against personal assets. This is not uncommon if the trust assets are being used to carry on a business.25 Even this contractual stipulation does not give the creditor any direct access to the trust assets; it has effect only between the parties, and all it does is to deny the creditor any access to the trustee’s personal assets. In these cases, a creditor will seek to force the trustee to use the trustee’s right of access to the trust property; and this may well be permitted.26 This is often called subrogation;27 but that seems to reflect a failure of terminology on the part of the common law, because subrogation usually arises when a person pays another’s debt. What we have here might

23 Stott v Milne (1884) 25 Ch D 710 (CA) at 715; X v A [2000] 1 All ER 490 (ChD). The lien gives a power of sale, under the supervision of the court: Re Pumfrey (1882) 22 Ch D 255 (ChD) at 261-262. 24 Hardoon v Belilios [1901] AC 118 (PC). The limits of this equitable right of indemnity are difficult to draw, but it is clear that it can be excluded by the terms of the trust. Note also that if the trustees act under the control of the beneficiaries, then an agency relationship may be found to be superimposed over the trust relationship, making beneficiaries vicariously liable to third parties: Trident Holdings Ltd v Danand Investments Ltd (1988) 64 OR (2d) 65, 49 DLR (4th) 1 (CA). Because these theories give access to what is clearly a different patrimony – that of a beneficiary – they are not explored here. The equitable indemnity, however, only makes sense in the light of the principle we are concerned with, that even proper trust liabilities are exigible against the personal assets of the trustee. 25 The use of trusts as business associations has occurred to different extents in different jurisdictions, largely affected by taxation considerations. For discussion of the form of words required to ensure the trustee’s personal assets are protected, see H A J Ford, “Trading trusts and creditors’ rights” (1981) 13 Melbourne U LR 1 at 3-4; M C Cullity, “Legal issues arising out of the use of business trusts in Canada”, in T Youdan (ed), Equity, Fiduciaries and Trusts (1989) 181 at 198200; M C Cullity, “Personal liability of trustees and rights of indemnification” (1996) 16 ETJ 115 at 128-130; D J Hayton, “Trading trusts, trustees’ liabilities and creditors”, in J Glasson and G Thomas (eds), The International Trust, 2nd edn (2006) 511 at 515-517. 26 It may be that on a proper interpretation of the facts, the court will conclude that the trustee has granted the creditor a charge over his right of reimbursement: Re Pumfrey (1882) 22 Ch D 255 (ChD); Ford (n 25) at 3-4. 27 For example, Re Frith [1902] 1 Ch 342 (ChD); Matthews (n 3) at 216 n 108; Cullity, “Legal issues” (n 25) at 200. This is also the approach in C Mitchell and S Watterson, Subrogation: Law and Practice (2007), and although I am doubtful of the classification as subrogation, Chapter 12 of this book is the best available textbook treatment of the subject of creditors’ rights in common law trusts, a topic often consigned to the footnotes of general works on trusts.



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better be described as a kind of execution.28 But execution cannot take place before judgment, and execution against a claim belonging to one’s judgment debtor has its own special procedures (historically known as garnishment). It might be better still to consider this as an oblique action, in which a creditor is allowed to enforce his debtor’s claim against another.29 Whatever we call it, this gives trust creditors a kind of access to the trust assets; but it is a derivative access. It is through the trustee’s rights, not direct, as it would be if the trust were a true patrimony, whose own assets were answerable for its own liabilities. This is by no means a pure technicality. It means that the trust creditor’s access to the trust assets can never be stronger than the trustee’s own claim to them. But the trustee’s own claim can easily be diminished or lost. It can be restricted or even given up in the trust deed, to which of course the trust creditor is not a party.30 More seriously, the trustee’s claim may not exist where, in contracting with the trust creditor, the trustee exceeded his authority under the trust, even though the creditor may have no knowledge of this.31 The trustee’s claim against the trust assets might even be diminished or eliminated by his commission of an unconnected breach of trust. That breach may create a liability that will be set off to reduce or eliminate his right of reimbursement, to the detriment of the trust creditor who may have had nothing to do with the breach.32 The case of a bankrupt trustee illustrates one nuance. The trust creditor might think that he will not be too badly affected by the trustee’s personal bankruptcy, if there are still trust assets, because those trust assets will not form part of the bankruptcy estate. But as we have seen, those are the very assets that the creditor cannot directly touch. The creditor claims those assets only through trustee’s rights (the right of reimbursement, and the supporting lien) over the trust property; but now there is a further difficulty. Those rights are personal assets of the trustee, and therefore they do form part of the bankruptcy estate. It could follow that these rights therefore pass 28 See again Matthews (n 3) at 216 n 108, who also uses the terminology of execution, and Hayton (n 25) at 522, who refers to “equitable execution”. 29 For an example of a codified oblique action, see Civil Code of Québec, arts 1627-1630. Mitchell and Watterson do recognise that claims of this kind form one of three major categories of subrogation as they see it: Subrogation (n 27) 5-7; this category they label “special insolvency regimes”. Their category is narrower than the oblique action, because their category only covers cases in which the two claims are linked, the one serving as an indemnity in respect of the other. 30 Although some Trustee Acts seem to forbid this. 31 The result is that if the trust is used as a business vehicle, “the creditor is subject to the full rigours of the doctrine of ultra vires”: Ford (n 25) at 2. 32 Re Johnson (1880) 15 Ch D 548 (ChD).

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to his trustee in bankruptcy for the benefit of all the trustee’s creditors.33 The result would be that the bankrupt trustee could recover from the trust assets a sum equal to the debt owed to the trust creditor, but that sum would be divisible pro rata among all creditors, both personal and trust creditors.34 The majority view, however, appears to be that the trust property acquired via the trustee’s right of reimbursement should be available in priority to the trust creditors, in virtue of whose debts such property became available.35 But this does not mean that the trust forms a patrimony; quite the opposite, since clearly trust creditors do have access to personal assets of the trustee.36 It is rather an ordering of different claims in relation to different assets, something that is unusual but not unheard of within a single patrimony.37 (3) Beneficiaries of a common law trust The analysis of the rights of creditors helps to show clearly that the common law trust cannot be understood as a patrimony. So far we have not considered beneficiaries. In fact, there are many parallels between the situation of beneficiaries and that of creditors. Most importantly, a beneficiary has no rights in relation to the trust property except derivatively and through the trustee’s rights to that property. This is just another way of saying that the trust cannot exist without the trustee. We need not reopen old debates by asking whether a beneficiary, like a trust creditor, has no real rights but 33 This is one reading of Jennings v Mather [1902] 1 KB 1 (CA) although the case as litigated did not present any conflict between trust creditors and non-trust creditors. 34 This is also the solution in the oblique action in Quebec: Civil Code of Québec, art 1630. 35 Ford (n 25) at 19-24; Hayton (n 25) at 522; Mitchell & Watterson, Subrogation (n 27) 435; A W Scott, W F Fratcher and M L Ascher, Scott and Ascher on Trusts, vol 4 (2007) 1902. There was a clear holding to this effect in Re Richardson [1911] 2 KB 705 (CA) although that was in the context of the trustee’s personal indemnity claim against beneficiaries (mentioned above, n 24). One justification for this position is that a trust creditor should have special access to assets arising from the trustee’s recourse to the trust property, since that recourse only arises in virtue of the existence of the trust creditor’s claim. But at common law that reasoning was not enough to allow a plaintiff, who had a tort claim against an insolvent company, any special access to the insolvent company’s indemnity right against its insurer. English courts held that the insurance claim went to benefit all creditors, and this led to statutory intervention: Mitchell & Watterson, Subrogation (n 27) 395-397. 36 One author argues that trust creditors should be treated as secured creditors: D R Williams, “Winding up trading trusts: rights of creditors and beneficiaries” (1983) 57 ALJ 273. 37 In the common law, a partnership is not a legal person and has no patrimony; partnership creditors have access to personal assets of the partners, while personal creditors of a partner have access to that partner’s share of the partnership assets. Even so, partnership creditors are given first access to partnership property, and vice versa: see for example Read v Bailey (1877) 3 App Cas 94 (HL), showing that in a case of fraud, one partner may prove against another, in competition with that other’s personal creditors. The same kind of ordering obtains in Quebec, where a partnership again does not have legal personality: Civil Code of Québec, art 2221, para 2.



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only a claim against the trustee.38 But we can say that (i) the beneficiary’s only rights are rights held in the rights of his trustee, while noticing that (ii) these rights of a beneficiary sometimes have effects on third parties. We can substantiate (i) by observing that if a third party wrongfully causes damage to the trust property, there is no claim by a beneficiary against the third party.39 Only the trustee has a claim, which of course is itself held in trust. We can substantiate (ii) by noticing that some transferees of the trust property cannot take it unencumbered by the claims of the beneficiary. In particular, in what the common law considers only a special case of this general principle, the creditors of the trustee cannot take trust property. But conceptually, this is not because the beneficiary has a right in the trust property; it is because the third party is not allowed to interfere with the trustee’s obligations in relation to that property. This idea is not alien to the civil law, which also recognises that while a personal obligation does not create a real right but only a claim against a particular debtor, nonetheless it is possible that there might be claims in delict against third parties who wrongfully interfere in the performance of an obligation.40 The common law trust was not created by changing the idea of property; it was not created by any decision to split ownership into “legal title” and “equitable title”. Rather, it was created by a distortion of the law of obligations, in particular an enormous expansion of the universally accepted possibility of third party liability for interference with obligations.41 As the great legal historian S F C Milsom has said: The life of the common law has been in the abuse of its elementary ideas. If the rules of property give what now seems an unjust answer, try obligation; and

38 For example: A W Scott, “The nature of the rights of the cestui que trust” (1917) 17 ColumLR 269; H Stone, “The rights of the cestui que trust” (1917) 17 ColumLR 467. More recently, see D W M Waters, “The nature of the trust beneficiary’s interest” (1967) 45 Canadian Bar R 219; R Nolan, “Equitable property” (2006) 122 LQR 232. 39 Leigh and Sillavan Ltd v Aliakmon Shipping Co [1986] AC 785 (HL) at 812; MCC Proceeds Inc v Lehman Brothers International (Europe) [1998] 4 All ER 675 (CA). A mortgagee selling the mortgaged land under a power of sale owes a duty to sell reasonably; if there is a trust, even if the mortgagee is aware of it, the duty is owed to the trustee but not to the beneficiary: Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12 (CA). In the words of Stone (n 38) at 479: “If, therefore, the cestui que trust has a right in rem to the trust res itself, we shall have to admit that, unlike any other right in rem, it can not be invaded by a tortious destruction of the res which is the subject of the right”. 40 See for example S Ginossar, Liberté contractuelle et respect des droits des tiers: émergence du délit civil de fraude (1963); P-G Jobin and N Vezina, Baudouin et Jobin: Les obligations, 6th edn (2005) 523-526; Y Emerich, La propriété des créances: approche comparative (2007) 435-455. 41 For a fuller account, see L Smith, “Transfers”, in P Birks and A Pretto (eds), Breach of Trust (2002) 213.

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equity has proved that from the materials of obligation you can counterfeit the phenomena of property.42

The counterfeit acquired the name of “equitable title” and it is still in circulation. It is only a metaphor, which is not to say that it is wrong or even misleading, but only to say that it is not literally true.43 “Equitable title” suggests a direct relationship between a beneficiary and the trust property. This does not exist. All “equitable proprietary rights” require at least two people, in addition to the object of the right.44 I do not mean that two people must be present in order for there to be a justiciable dispute; I mean that the beneficiary’s right itself cannot be understood as a direct relationship between the beneficiary and the trust property. The trustee has rights in the object; that is, rights in the trust property. The trust beneficiary’s rights are rights in the rights that the trustee holds in the object. Those beneficiary’s rights are the converse of the obligations owed by the trustee to the beneficiary, in respect of the trust property. This is why there is no difficulty at all with a trust of purely personal rights, like a debt; there needs to be “trust property”, but “property” only in the wide sense that includes all assets.45 And so again, a trust cannot exist without a trustee.46 The obligational roots of the common law trust explain a great deal. This is why common law trusts arise rather easily, out of informal transactions as well as formal ones; statutory interventions apart, obligations relating to property can be created quite informally. This is also why common law trusts arise rather easily by operation of law, because obligations relating to 42 Historical Foundations of the Common Law, 2nd edn (1981) 6. 43 Smith (n 15). 44 “At least” two because an equitable interest can itself be made subject to a trust, or otherwise encumbered with an equitable interest such as a charge. Sub-trusts may seem exotic but this is how almost all investment securities are held in industrialised common law jurisdictions, at least those which lack a statutory framework for the intermediated holding of securities. 45 A point that puzzled Lepaulle, leading him to reject the idea that a trust beneficiary could possibly have a real right: “Comment le droit du cestui serait-il dans son essence un droit réel alors que la ‘res’ peut être un droit personnel? Un droit réel sur un droit personnel, quelle logomachie!”: Lepaulle, Traité (n 4) 25. The beneficiary’s right is not a real right, as a civilian would understand it; but it is a legal relation that can affect third persons. The civil law accepts a similar juristic structure when it allows hypothecs over purely personal claims. This juristic structure is probably best analysed as a case in which one person holds powers over another person’s rights, where “powers” is used in the sense developed by Hohfeld (W N Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 3rd printing with new foreword by A L Corbin (1964)); this would resolve Lepaulle’s logomachy, but this point cannot be developed here. 46 Nor can an equitable easement exist, or a restrictive covenant (enforceable only in equity), or an equitable mortgage or charge, without the presence of another person, onto whose rights these equitable interests are engrafted.



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property can also arise by operation of law, whether out of wrongdoing or out of unjust enrichment. It is the nature of the equitable tradition to turn any such obligation, if it relates to the benefit of ascertained property, into a trust. This is why the trust is still traditionally defined as an obligation in relation to particular property.47 Equity simply understood the idea of an obligation differently from the common law and differently from the civil law tradition. Equity was, and is, much more willing to let obligations (if they relate to the benefit of particular property) have effects on third parties, at least those who were not good faith purchasers for value of the property in question.48 Since the common law trust was crafted out of obligations, it should not be surprising that it is a basic principle that the common law trust is not a legal person. This basic principle is found in every book on the common law of trusts. Nor should it be surprising that the trustee is essential: the trust is the obligation that is owed by the trustee. Another consequence is that the incidents of beneficiaries’ equitable interests under trusts can be infinitely variable; founded on obligations, they are not subject to any numerus clausus. And another consequence is that the common law trust does not constitute a distinct patrimony. The attempt to understand the common law trust in terms of the civilian idea of patrimony, however, allows us to draw an interesting conclusion. The juristic nature of the common law trust is such that we can say that only assets, and never liabilities, are held in trust in a common law trust. This is an important difference from some civilian manifestations of the trust. This also reveals an interesting contrast, within the common law, between the trust and the estate of a deceased person. 47 The very first sentence of a leading textbook (D J Hayton, P Matthews and C Mitchell, Underhill and Hayton: Law of Trusts and Trustees, 17th edn (2007) 2): “A trust is an equitable obligation, binding a person (called a trustee) to deal with property (called trust property) owned by him as a separate fund, distinct from his own private property, for the benefit of persons (called beneficiaries or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation” (emphasis added). So far from seeing obligations held in trust, we see that that obligations (relating to particular assets) are the trust. 48 For a full argument: L Smith, “Fusion and tradition”, in S Degeling and J Edelman (eds), Equity in Commercial Law (2005) 19, especially at 32-35. Langbein has famously argued for a contractarian understanding of trusts: J H Langbein, “The contractarian basis of the law of trusts” (1995) 105 Yale LJ 625. The trust certainly has characteristics of a deal between settlor and trustee; but in order to understand the third party effects of trusts, as for example in the bankruptcy of the trustee, we have to notice two other things: first, that the trustee comes under enforceable obligations to the beneficiaries (see Langbein at 646-647); secondly, that where (but only where) obligations relate to the benefit of particular assets, Equity treats third party transferees of such assets as potentially affected by such obligations (compare Langbein at 647-648). In other words, the intentionally created trust has elements of a deal, but it has to be a deal about particular property.

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Common law textbooks typically state that it is fundamental that an estate is not a trust, although they are not so clear on what are the fundamental differences; usually the focus is on differences in the nature of beneficiaries’ rights. But a clear difference is that the estate in the common law has the same conceptual structure as the Scottish trust. The personal representative of the deceased acquires the deceased’s assets and his liabilities; but the personal representative is not personally liable on the liabilities that exist at the time of death. In other words, there is universal succession and the estate is a genuine patrimony.49 The statement that liabilities are never held in trust seems to be a basic one; but it is not found in any book on the common law of trusts. Like many unstated truths, when it is brought into the light it reveals a great deal.50 When common law trustees resign, one of the most contentious issues is the form of indemnity that they will obtain from their successors. They transfer the assets to their successors, but liabilities cannot be assigned; and since the liabilities are personal, there is no possibility of universal succession as there is in Scots law. Their personal liability continues, extending to their personal assets, so it is not surprising that they may seek express indemnities in addition to the rights given to them by operation of law.51

49 The reason lies, as always, in the history; the nature of the personal representative was strongly influenced by the ius commune. The common law executor was the Romanist heir, instituted as such by the will and subjected to the fiduciary obligation to apply the property according to the will. See W S Holdsworth, A History of English Law, 9 vols, repr edn, (1966) vol 3 at 572-595 (especially 583-584) and vol 6 at 652-657; T F T Plucknett, A Concise History of the Common Law, 5th edn (1956) 737-738; S Whittaker, “An historical perspective to the ‘special equitable action’ in Re Diplock” (1983) 4 JLH 3; R Zimmermann, “Heres fiduciarius? Rise and fall of the testamentary executor”, in Helmholz & Zimmermann (eds), Itinera Fiduciae (n 1) 267 at 301-304. The Court of Chancery, which took over from ecclesiastical courts the administration of estates for most purposes after the Restoration in the late seventeenth century, inevitably assimilated trustees and executors regarding their duties. 50 In Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 (PC), the trustee was a bank and, unusually, it was expressly authorised to deposit trust funds with itself as banker. Effectively, the trustee was authorised to borrow the trust  ­property on its own personal security. It did so and became insolvent; the question  was  whether the trust beneficiaries had any priority over the other creditors. The courts of  the Bahamas held that they did, but the Judicial Committee of the Privy Council reversed  these  decisions. The j­udgments reveal some conceptual difficulty with the question of what was the trust property; in fact, once the deposits were made, there was no longer any p ­ roperty held in trust and so no longer any trust. There were only unsecured personal obligations. 51 J K Kessler, Drafting Trusts and Will Trusts, 8th edn (2007) ch 31; Hayton et al, Underhill and Hayton (n 47) para 83.36, at 1011.



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C. CONCLUSION: TRUST AND PERSONALITY We have seen that the common law trust is not a patrimony; the trustee is the only one who has direct access to the trust assets. Trust creditors (and even beneficiaries) do not. In the context of business trusts or trading trusts, many commentators have observed that there is some potential injustice in this.52 Law reform has been suggested.53 But this has to be handled with some care, lest there be a fundamental but inadvertent change to the nature of the trust institution.54 Such a change would involve moving the common law trust towards the conceptual model that prevails in Scotland, or, going further, treating the trust as if it were a distinct legal person. Even in the common law, it is not uncommon to speak of the trust as if it were a legal entity, rather than a way of holding property. Examples abound. In a recent decision of the Supreme Court of Canada on fiduciary obligations, a number of trusts were named as parties to the litigation.55 Nothing turned on this and nothing was made of it, but a common law trust can no more be a party to litigation than can a contract. It is even more astonishing when such mistakes appear in the statute book. In the US, the National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated its Uniform Prudent Investor Act in 1994. The Act contains these provisions that apply when a trustee delegates the investment function to an agent: §9 … (b) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation. (c) A trustee who complies with the requirements of subsection (a) is not liable to the beneficiaries or to the trust for the decisions or actions of the agent to whom the function was delegated.56

Although no one can owe a duty to a trust or be liable to a trust, these provisions were enacted as law in many states.57 They were copied by the 52 Ford (n 25) at 28-30; D A Steele and A G Spence, “Enforcement against the assets of a business trust by an unsecured creditor” (1998) 31 CBLJ 72. 53 See Consultation Paper on Rights of Creditors Against Trustees and Trust Funds (English Trust Law Committee, 1997) 17-18, available at http://www.kcl.ac.uk/law/research/ centres/​trustlawcommittee/. See also Scott et al, Scott and Ascher on Trusts (n 35) 1906-1907. 54 On the dangers of reforming trust law in an unprincipled way, see R Flannigan, “The political path to limited liability in business trusts” (2006) 31 Advocates’ Q 257. 55 Strother v 3464920 Canada Inc, 2007 SCC 24. 56 http://www.uniformlaws.org [Editor’s note: the web address indicated originally, http:// www.nccusl.org, is no longer valid]. 57 See for example Connecticut Statutes, c 802c, s 45a-541i. Some states modified the Uniform Act; for example, California Probate Code s 16052(b) corrects the error in Uniform Act § 9(b), while s 16052(c) repeats the error in Uniform Act § 9(c).

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Uniform Law Commission of Canada in its Uniform Trustee Investment Act, 1997,58 and have since become law in some provinces.59 Again, reflecting the fact that the pressure to “entify” trusts is stronger when trusts are used as business associations, NCCUSL is now drafting a Uniform Statutory Entity Trust Act for business trusts.60 So too in Canada, there are recent (and as yet unproclaimed) amendments to the federal Bankruptcy and Insolvency Act61 that change the definition of “person” to include “income trusts”, a term used in Canada to denote business trusts, especially those whose units are traded publicly on stock exchanges.62 The idea is assimilation to the corporation: there is a whole system for the insolvency of a corporation, aimed at the fair treatment of creditors and providing for the possibility of avoiding bankruptcy if possible; and, the reasoning goes, if trusts are used instead of corporations, the same regime should be available. But the fundamental difficulty is that, as we have seen, only assets and never liabilities are held in trust. It is therefore difficult to see how a common law trust can be bankrupt. Of course, if it were a person, or even a patrimony, it would have liabilities as well as assets, and it could become bankrupt;63 but changing the definition section of a bankruptcy statute is not apt to change the juridical nature of a fundamental legal institution. The trust is a fundamental institution in the sense that it cannot be understood in terms of other institutions. It is not a sub-category of legal persons, nor of contracts, nor of anything else. Conversely, treating the trust as one of those things – in particular, treating it as a legal person – will, in the long run, threaten to destroy its status as a fundamental institution. 58 http://www.ulcc.ca/ 59 For example, the Nova Scotia Trustee Act, RSNS 1989, c 479, s 3F. Many Canadian Trustee Acts correct these errors (e.g. Trustee Act, RSO 1990, c T23, ss 27.2, 28). 60 [Editor’s note: NCCUSL promulgated the Uniform Statutory Trust Entity Act in 2009]. 61 RSC 1985, c B-3. 62 By a combination of two amending Acts, the definition of “person” will include a corporation, and the definition of “corporation” will include an income trust: An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act and to make consequential amendments to other Acts, SC 2005, c 47, ss 2(3), (5), as amended by An Act to amend the Bankruptcy and Insolvency Act, The Companies’ Creditors Arrangement Act, the Wage Earner Protection Program Act and ch 47 of the Statutes of Canada 2005, SC 2007, c 36, ss 1(1)-(3). Note also the combined effect of ss 124(2), (3) of the 2005 Act and s 61(2) of the 2007 Act, which will change the definition of “company” in the Companies’ Creditors Arrangement Act, RSC 1985, c C-36, to include income trusts. The CCAA is a statute that allows large companies to seek court-supervised protection from creditors with the goal of avoiding bankruptcy. 63 The Scots trust can become bankrupt: Gretton (n 2) at 102; for the same opinion in relation to the Quebec trust, see M Cantin Cumyn, “La fiducie, un nouveau sujet de droit?”, in J Beaulne (ed), Mélanges Ernest-Caparros (2002) 131 at 142.



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For this reason, there is some cause to ask whether the Quebec law of trusts might usefully be informed by the experience of Scotland. The legislative provisions in Quebec seem to have been inspired by Lepaulle’s work in the Traité. But there is a difficulty with a trust that is “un patrimoine indépendant de tout sujet de droit”.64 Trust beneficiaries have rights, and the corresponding obligations must be owed by a debtor.65 In the Scots model, as in the common law model, the trustee is the debtor, even though the Scots model differs from the common law in that the Scots trustee holds the trust debts in trust. But in Quebec, following the Traité, it appears that the trustee is not the titulary of the trust patrimony; he or she is only the administrator of the property of another.66 So who is the debtor? If it is not to be the trustee, the only possible answer appears to be that it is the trust itself. This possibility was evident to some extent in Lepaulle’s original thesis; he said that the beneficiaries’ rights were rights against the trust, not the trustee,67 while the trustee’s obligations were owed to the trust, not to the beneficiaries;68 but at the same time he denied that the trust was a person or a sujet de droit.69 This led him into some analytical difficulties, or at least so they seem to me; he had to argue that rights (and presumably obligations) need not belong to any sujet de droit: Nous constatons, en effet, que les droits ont deux manières d’être: ou bien ils appartiennent à un sujet de droit, ou bien ils sont affectés, de sorte que sujet de droit et affectation sont comme les deux foyers de l’ellipse qui enferme tout le plan juridique.70

Years later, he said that he thought that the best way to introduce the trust into a civilian system was as a legal person.71 It is sometimes suggested that 64 Lepaulle (n 4). 65 Civil Code of Québec, art 1371: “It is of the essence of an obligation that there be persons between whom it exists, a prestation which forms its object, and, in the case of an obligation arising out of a juridical act, a cause which justifies its existence”. 66 Civil Code of Québec, arts 1261 (set out in n 7), 1278 para 2: “A trustee acts as the administrator of the property of others charged with full administration”. On the other hand, note art 1278 para 1: “A trustee has the control and the exclusive administration of the trust patrimony, and the titles relating to the property of which it is composed are drawn up in his name; he has the exercise of all the rights pertaining to the patrimony and may take any proper measure to secure its appropriation” (emphasis added). 67 Lepaulle, Traité (n 4) 44-45. 68 Ibid, 43-44. 69 Ibid, 43. 70 Ibid, 50. 71 P Lepaulle, “La notion de ‘trust’ et ses applications dans les divers systèmes juridiques”, in Actes su congrès international de droit privé tenu à Rome en juillet 1950, vol 2, L’unification du droit / Unification of Law (1951) 197 at 206-207. See also his book review, (1952) 4 RIDC 377 at 378,

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Lepaulle changed his mind;72 but in the Traité he was primarily describing the common law trust in civilian terms, which is not the same as advocating how the trust should be introduced by legislation into a civil law system. In Quebec, where the codal provisions seem intended to enact the Traité’s civilian description of the common law trust, one influential commentator has argued that the trust should be seen as, itself, a sujet de droit.73 The nature of the Quebec trust remains under discussion;74 although it has not featured much in the debates, it seems at least possible that the Scottish model, in which the trustee holds the trust patrimony, could be adopted.75 Textual arguments from the Civil Code point in both directions;76 court decisions are similarly inconclusive.77 The main reason that Quebec lawyers would resist the Scots solution lies perhaps in the unsatisfactory analysis of the trust under the Civil Code of Lower Canada. The Supreme Court of Canada held that the trust property was owned by the trustee, but that he held a kind of ownership that was sui generis.78 This was strongly criticised by some authors as inconsistent with basic elements of the law of property.79 But it is important to notice that the Scots solution does not presuppose a kind of sui generis ownership.80 The trustee is the full, civil law owner, with usus, fructus and abusus. The beneficiary has only personal rights against the trustee – more precisely, against the trustee in his quality as trustee, since these rights are exigible

and P Lepaulle, “The strange destiny of trusts”, in R Pound, E N Griswold and A E Sutherland (eds), Perspectives of Law: Essays for Austin Wakeman Scott (1964) 226 at 237-238. 72 E.g. in Beaulne, Fiducies (n 12) 26. 73 Cantin Cumyn (n 63). Here there is the nuance that the sujet de droit is seen as something capable of holding patrimonial rights, but less than a full legal person, hence perhaps unable to hold extrapatrimonial rights or to hold certain positions (such as that of trustee of another trust). 74 See Beaulne, Fiducies (n 12) 21-50, especially 23-24. 75 See D W M Waters, M Gillen and L Smith, Waters’ Law of Trusts in Canada, 3rd edn (2005) 1353-1356. 76 See for example n 66. 77 One case raised directly the question whether a trust could be a party to litigation, and it was held that it could not, and the proceeding was therefore a nullity: Château Wilson inc  v  Fiducie  familiale Pezeyre-Lacroix-Foch (2003) Doc 500-32-069887-026, 2003-07-23, J Michel A Pinsonnault, AZ-50184908 (QC). Other cases show a mixture of trusts named as litigants, without any issue being taken, or trustees named in their capacity as trustees, which is more appropriate to the Scots model. For other citations see Waters et al, Trusts (n 75) 1354-1355. 78 Royal Trust Co v Tucker [1982] 1 SCR 250. 79 See M Cantin Cumyn, “La propriété fiduciaire: mythe ou réalité?” (1984) 15 Revue de Droit de l’Université de Sherbrooke 7. 80 Gretton (n 2) at 105.



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only against the trust patrimony.81 There is nothing in this that is contrary to civilian thinking about property. Indeed, it is quite common to find ­restrictions on the enjoyment of ownership that are purely obligational, and so long as they are purely obligational, there can be no theoretical objection. A simple example is a sale with reservation of title, called an instalment sale in Quebec.82 Full ownership is in the seller; the buyer has only physical control or detention, not even possession in the civilian sense;83 and yet the buyer, pursuant to his purely contractual rights, enjoys the property as if he was the owner. Automobiles all over the province are purchased in this way, and there is no concern about sui generis ownership. So long as the restrictions on a trustee’s ownership arise only in the law of obligations, it can be understood as ordinary ownership. In Quebec, the lease of an immovable used as a dwelling provides an even stronger example.84 The lessor has full ownership; the lessee has only personal claims and holds no real right;85 and yet the lessor is generally unable to transfer his or her ownership free of the (formally personal) rights of the lessee.86 Although the lessor’s ownership rights are thus heavily constrained, he or she is not understood as holding sui generis ownership. Indeed, if the civilian jurist can picture the extension of this juristic mode of protection of the lessee to all kinds of property, and to all obligations regarding the benefit of property, he or she will have an understanding of how the common law trust arose: not by changing the law of property, but by extending the effects of obligations to third parties.87 As we have seen, it is definitionally true that a common law trust is not a legal person; but of course this definitional truth does not necessarily hold in other legal traditions. And yet, in any legal tradition, if the trust becomes a legal person then it ceases to be a fundamental legal institution; it becomes instead part of the law of persons, along with business corporations, cooperatives, some foundations, and so on.88 Of course, it is true that much – 81 Rights arising out of a breach of trust, however, could be rights against the trustee in his personal capacity. See n 19. 82 Civil Code of Québec, arts 1745-1749. 83 See D-C Lamontagne, Droit de la vente, 3rd edn (2005) 212. 84 Civil Code of Québec, arts 1892-1978; see the editors’ “Note to the 2006-7 Edition/Note de l’édition 2006-2007”, in J-M Brisson and N Kasirer (eds), Code Civil du Québec: Edition critique/Civil Code of Québec: A Critical Edition, 14th edn (2006) at xvi-xxi. 85 Art 1936. 86 Art 1937. 87 See section B. (3) supra. In the terms of the French and Quebec legal traditions, “equitable title” is perhaps just a question of inopposabilité of a legal title. 88 M Cantin Cumyn suggests that only a common lawyer would think that the trust would be diminished if conceptualised as a legal person: “Rapport general”, in M Cantin Cumyn (ed),

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perhaps all – of what is done with the law of trusts can, in some sense, be done through legal persons.89 Whether legal persons can serve as a functional equivalent for trusts then becomes merely a question of what kinds of legal persons are available, and how flexible are the governing provisions. But the lesson of history is that the trust has arisen, not once but many times and in many forms, exactly because people wished to accomplish lawful and licit goals that they could not accomplish through the use of contracts or legal persons.90 The “entification” of the trust spells, in the long run, the end of the law of trusts by assimilation. Perhaps we can leave the last word to Lepaulle. After stating that he thought the best way to create a trust by legislation in a civilian system was as a legal person, he said: Je ne me cache pas que c’est là une solution facile: au lieu de faire travailler l’esprit sur des conceptions délicates et des constructions audacieuses, elle se contente de prendre dans notre arsenal familier une vieille notion. Mon âme de théoricien s’en attriste un peu, mais le vieux praticien ne peut que s’en réjouir car il travaillera plus vite sur un terrain plus sûr pour le plus grand bien des justiciables.91

Perhaps he gave up too soon. The learning from Scotland shows how the trust can be understood as a fundamental juristic institution, consistently with civilian notions of property, and without any talk of Equity. Author’s note: In addition to being presented at the Workshop on Terminology and Property Models in the 21st Century, Faculty of Law, McGill University,

La fiducie  face au trust dans les rapports d’affaires (1999) 11 at 28. But it is perhaps a misunderstanding to say that “le droit anglais relatif à la personnalité morale n’admet ­ qu’un seul  cas de figure, la corporation” (emphasis in original), since “corporation” in the common law does not correspond to société (as would “company” or “business association”); ­“corporation”  corresponds directly to personne morale. The common law knows many kinds of corporations: universities, towns, incorporated golf clubs, co-operatives, and “corporations sole” such as the Crown or a bishopric. Most charities are now run as corporations, even though in times past most took the form of trusts. See D M Walker, The Oxford Companion to Law (1980), sv “corporation”. Just like the civil law, the common law admits (Cantin Cumyn, ibid) “la multiplicité des personnes morales, de leurs modes de constitution et de leurs régimes juridiques”. 89 A classic study is F W Maitland, “Trust and corporation”, H A L Fisher (ed), Collected Papers of Frederick William Maitland, vol 3 (1911) at 321. 90 See Helmholz and Zimmermann (eds), Itinera Fiduciae (n 1). Of course, trusts have often been used for unlawful and illicit purposes too; but this is a misfortune that they share with contracts and with legal persons. See M Lupoi, “A civil law perspective on trusts and the Italian case” (2005) 11 Trusts and Trustees 10 at 13-14. 91 Lepaulle “La notion” (n 71) at 207. There is some irony in this when it is reported that the suggestion that the Quebec trust be created as a legal person was rejected by the practitioners: Beaulne, Fiducies (n 12) 22.



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21 September 2006, this paper was presented at the 2nd Congress of the World Society of Mixed Jurisdiction Jurists, Faculty of Law, University of Edinburgh, 30 June 2007. I am grateful to participants at both events, especially George Gretton, and to Nicholas Kasirer, Alexandra Popovici and Robert Stevens for helpful input.

4  Square Peg, Round Hole? Patrimony and the Common Law Trust Paul Matthews*

A. INTRODUCTION 62 B. DIFFICULTIES WITH PATRIMONY 64 C. PATRIMONY AND SUCCESSION 66 D. USES OF PATRIMONY IN RELATION TO TRUSTS 68 E. JENNINGS v MATHER 75 F. OTHER POINTS 76 G. PATRIMONY ON DEATH 77 H. SCOTTISH TRUSTS 78 I. DEALINGS WITH TRUST PROPERTY 80 J. WHY ADOPT A PATRIMONIAL APPROACH TO TRUSTS? 81 K. CONCLUSION 83 A. INTRODUCTION The trust is a big problem for civil lawyers. Partly it is a problem for a good reason. But also for a bad one. The good reason is that the trust is a legal relationship that has to do with property rights, and the notion of property in the civil law is simply too different from that in the common law world to enable the trust to pass from one type of system to the other without both a comparative understanding of this significant difference and some suitable

   * Solicitor Advocate at Withers LLP London and Honorary Professor, Dickson Poon School of Law, King’s College, London. I am grateful to the participants at the Trusts and Patrimonies Workshop (Edinburgh Centre for Private Law, 3 May 2013) who made valuable comments on an earlier draft of this paper. I am responsible for all remaining errors. Unless otherwise indicated, translations are the author’s own.



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plan for coping with it.1 Both these things can be achieved, and the trust can be understood in the civil law, though at some cost, which lessens its attraction. I do not deal further with this issue in this paper. The bad reason is the doctrine of patrimony, which is the subject of this paper. In broad terms, the notion of patrimony2 derives from the notion of personality. There is evidence that the doctrine of patrimony existed in Roman times,3 though it reached its full flowering only with the classic French nineteenth-century work of Aubry and Rau. They based their work on the earlier work of Zachariæ, a German scholar writing on the Code Napoléon in force in the Rhineland. According to their theory, every person must have a patrimony, and only one.4 Not every civil code makes express provision for the patrimony. Although the German BGB5 and the Civil Code of Québec6 do indeed mention it, the French Code of 1804 certainly did not, forcing Aubry and Rau to rationalise its existence from everything else that they found in the text of the code.7 The theory of Aubry and Rau has been considerably criticised, and refined, by subsequent commentators,8 but so far as I know no mainstream civilian writer has gone so far as to say that there is no such thing as patrimony. It is, however, right to say that lawyers in other civil law jurisdictions (particularly the Germanic) would not regard their view of patrimony as necessarily the same as that of Aubry and Rau.9 I use it here because it is the most developed theory. According to Aubry and Rau, patrimony is a theoretical construct comprising all items of economic value, both positive and negative, both present and

  1 See P Matthews, “The compatibility of the trust with the civil law notion of property”, in L Smith (ed), The Worlds of the Trust (2013) 313.    2 See L Smith, “Trust and patrimony”, Ch 3 above at 44.    3 See e.g. G L Gretton, “Trusts without equity”, Ch 5 below at 97-98.    4 C Aubry and F-C Rau, Cours de droit civil français d’après la méthode de Zachariæ, vol 6, 4th edn (1873) book 2, div 1, para 573. See the English translation by N Kasirer, “Translating part of France’s legal heritage: Aubry and Rau on the Patrimoine”, Ch 8 below.    5 For example, BGB, s 1922(1), using the word Vermögen.    6 Article 2, first sentence, baldly says: “Every person has a patrimony”.   7 Aubry & Rau, Cours de droit civil (n 4) para 573, n 1.   8 P Cazelle, De l’idée de la continuation de la personne comme principe des transmissions universelles (thesis) (1911); F Gény, Méthode d’interprétation et sources en droit privé positif, 2nd edn (1954) 126-129; M Planiol and G Ripert, Treatise on the Civil Law, vol 1, 12th edn (1939) para 2149, n 2; A N Yiannopoulos, Louisiana Civil Law Treatise, vol 2, 4th edn (2001) para 192.   9 Cf B Akkermans, The Principle of the Numerus Clausus in European Property Law (2008) ch 4, esp at 244-252.

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future,10 appertaining to a particular individual.11 In homely terms, it is like a bag, originally empty, which from time to time contains both assets and liabilities. In principle, therefore, it is the legal expression of the economic personality of a person.12 It has particular importance in relation to the rights of creditors and the rights of heirs. For creditors, the patrimony of their debtor is a security for payment. Since it includes future assets, creditors can simply wait until the debtor becomes able to pay (maybe years later, when he or she has inherited from parents or others), and then attach the assets. B. DIFFICULTIES WITH PATRIMONY But this creates difficulties with certain Anglo-Saxon ideas. One is bankruptcy, a process in which current assets are applied in pro rata discharge of unsecured debts proved by creditors, and at the end of which process the debtor is discharged from all his unsecured debts existing at the date of bankruptcy. Thus the former debtor once discharged may acquire assets in the future without any fear that the former creditors will be able to seize them. The argument is that this encourages entrepreneurs to take risks and helps the economy grow. Civil law systems typically have procedures for the orderly payment of debts when a debtor becomes unable to pay his debts as they fall due. We may perhaps distinguish between two types of civil law system, the “Latin” and the “Germanic”. The “Latin” systems have long had procedures for companies and for individuals who carry on business (but only in relation to the business), which become insolvent.13 But these do not apply to natural persons not carrying on business. On the other hand, the “Germanic” systems have procedures which apply across the board to companies and individuals, even if not carrying on business.14 However, in either event, these are procedures for ensuring orderly and pro rata payment; neither kind of system offers the debtor a discharge from his liabilities, unless the creditors themselves so agree. Thus, after the procedures are over, the debtor  10 The German Vermögen is particularly clear in this case, because etymologically it refers to capacity, i.e. what may be acquired. The Liechtenstein trust law uses the term Treuhandvermögen to refer to the trust fund.  11 Aubry & Rau, Cours de droit civil (n 4) para 573.2; J Carbonnier, Droit civil, tome 3, Les biens, 19th edn (2000) paras 1-8.  12 Aubry & Rau, Cours de droit civil (n 4) para 573.2.  13 See e.g. the Italian legge fallimentare, Regio Decreto 16 March 1942, No 267, art 1, applying only to “entrepreneurs carrying on a commercial activity, other than public bodies”.  14 See e.g. the old German Konkursordnung of 1877.



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remains at risk from unsatisfied creditors if he acquires any assets of value in the future. However, in modern times, some civil law systems have finally introduced systems of discharge from the remaining unsatisfied debts. France did so in 1985, though only for businesses.15 It took until 2004 to do the same for individuals in relation to non-business affairs.16 Other civil law countries, such as Italy, still have not done so. Germany introduced a new Insolvenzordnung (InsO) in 1999, which applies to all, companies and individuals, carrying on business or not, alike. This provides for discharge (at the request of the debtor) for remaining debts after application of available assets,17 though there are a number of important bars to discharge,18 and there is some evidence that it is difficult to obtain the discharge, for example, the website advice to German debtors to move to the UK and claim the benefit of the UK bankruptcy regime,19 and English decisions about those who tried to do so.20 Another difficulty arises in relation to company law. Until the nineteenth century, the collective carrying on of business by Englishmen was done in part by corporations created by Royal Charter, such as the East India Company and the Hudson Bay Company, but mostly by means of partnerships and trusts. These did not involve limiting the liability of the participants. However, the introduction of the joint stock company with separate legal personality did. Limited liability in effect meant that a segregated asset pool was created, the capital of the company, to which alone the creditors of the company could have recourse. The result was something approaching a second patrimony for shareholders. Since at the outset there had to be several participants (seven in England), the impact on patrimonial theory was disguised by being shared out among them. But, once the introduction of the so-called “one man company”21 became possible in the twentieth century,22 the limited liability company could be seen  15 Loi No 85-98 du 25 janvier 1985, art 169.  16 Code de la consommation, liv III, tit III.  17 InsO, ss 286, 301.  18 InsO, s 290.  19 E.g. http://www.privatinsolvenz-hilfe.org/en/german-bankruptcy-law.html (last accessed 28 October 2014).  20 See e.g. Sparkasse Hilden Ratingen Velbert v Benk [2012] EWHC 2432 (Ch); Sparkasse Bremen AG v Armutcu [2012] EWHC 4026 (Ch).  21 And analogue institutions such as the Anstalt or “establishment” of Liechtenstein law.  22 Indeed, for member states of the European Union, not just possible but compulsory: see the Twelfth Council Company Law Directive 89/667/EEC of 21 December 1989 on single-­ member private limited-liability companies, OJ L 395, 30/12/1989, 40.

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for what it really was: incompatible with the Aubry and Rau theory of patrimony. In fact, there always were exceptions to the Aubry and Rau theory. Fiduciary contracts were a means by which a first person entrusted some of his assets to a second, who was their owner, but managed them in the interest of the first person, or even a third person intended to benefit from the arrangement. Roman law had known such contracts, under the name of fiducia. And, as fiducie, this idea survived the French Revolution, despite not being mentioned in the Code Napoléon of 1804.23 The Germanic civil law systems knew it too, under the name of Treuhand. Whatever the name, these arrangements allowed that the second person in effect had at least two patrimonies, one personal and one fiduciary. And then the institution – well known to civil law systems of all stripes – of the foundation (fondation in French, Stiftung in German, stichting in Dutch) was an express means for a person to divide his patrimony into two parts, thereby creating an independent and separate fund (which generally had legal personality and so owned itself) dedicated to a particular purpose or purposes.24 C. PATRIMONY AND SUCCESSION But, because patrimony is an expression of the economic personality of a property owner, it is perhaps of greatest significance on his death, when it comes to the question of inheritance by his heirs. In essence, the economic personality is transmitted intact to the heirs. And the civil law rule is that the transfer takes place immediately on death, without the intervention of any liquidation mechanism, such as the system of personal representatives employed by the common law. As the French say, “Le mort saisit le vif, sans ministère de justice” (“Property passes from the dead to the living, without any intervention of the court”). If there is only one heir, he or she in effect becomes the deceased.25 Common lawyers will need to be reminded that the transmission of the patrimony will include therefore the transmission of the debts of the deceased. This means that in principle (and unlike the

 23 See C Witz, La fiducie en droit privé français (1981).  24 See e.g. article 18 of the French Loi du 23 juillet 1987: “Foundation refers to the act by which one or more persons, physical or legal, decide irrevocably to devote assets, rights or resources to the carrying out of a non-profit-making project of public interest”.  25 H Mazeaud, L Mazeaud, J Mazeaud and F Chabas, Leçons de droit civil, tome IV, vol 2, Successions-Libéralités, 5th edn by L Leveneur and S Leveneur (1999), paras 1203-1221.



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position in common law)26 the heir is personally liable for the debts, whether or not there are sufficient assets to pay them,27 the damnosa hereditas of the Roman law.28 Of course, in practice there are mechanisms in civil law ­systems by which heirs can have a look before deciding whether to accept the inheritance.29 But the principle is plain. And there are occasions when the rule is critical.30 I once won a case in Switzerland because of it. But patrimony is more than just a convenient bag to hand on to the heirs of the deceased property owner. It enables everyone to examine the question of what actually should be handed on in the first place. An important principle in the Latin versions of the civil law in the past was keeping assets – particularly land – in the family. The French referred to the principle of la conservation du bien dans la famille (“keeping property in the family”). In the common law world we have largely lost the dynastic attachment to particular assets. The Industrial Revolution separated people from the land, and unrestrained nineteenth-century capitalism enabled entrepreneurs to make far more money than they could ever have inherited. I say “largely lost”. A few aristocrats and wealthy families keep it going, usually in relation to an ancient family seat and attached heirlooms. For this purpose they use trusts, and in some cases the old-fashioned so-called strict settlement or the marriage settlement. But the rest of us do not have the same sense of attachment to particular things. However it is very different in the civil law world, where the Industrial Revolution came later and capitalism red in tooth and claw had more difficulty in taking off. In the civil law world, in relation to inheritance, the rights of the family still predominate, and freedom of testation is still limited. In some systems spouses qualify for a share, or for a usufruct of a share, and in others they do not. Usually the minimum proportion of the patrimony of the deceased reserved for the heirs (the réserve) varies according to the number of children. And, importantly, gifts made during the deceased’s lifetime, or during the last part of it, are taken into account in calculating the compulsory  26 See notes 39-43 below and the associated text.  27 Mazeaud et al, Leçons de droit civil (n 25) para 1218; A Torrente and P Schlesinger, Manuale di Diritto Privato, 16th edn (1999) para 545; whether the principle applies in Scotland seems contentious: see e.g. J McLaren, The Law of Wills and Succession as Administered in Scotland, 3rd edn (1894), ch LXIX (Yes); G L Gretton and A J M Steven, Property, Trusts and Succession, 2nd edn (2013) para 25.35 (No).  28 J Thomas, Textbook of Roman Law (1976) 498-499.  29 E.g. Justinian’s beneficium inventarii: Inst II.19.6; C 6.30.20.  30 See e.g. EL v Switzerland [2000] WTLR 873, where the European Court of Human Rights had to consider the compatibility of this rule (in Swiss law), in a criminal context, with Article 6 of the European Convention on Human Rights.

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shares of the heirs.31 This does not, however, restrict the freedom to alienate ownership itself. A gift is valid at the time, even though subject to possible32 “reduction” (abatement) after the donor’s death. This may mean that the actual thing given away has to be returned to the patrimony (réduction en nature, abatement in specie: still the law in Luxembourg, and formerly so in France and Belgium), or it may simply mean that the value of the thing has to be paid back into the patrimony (réduction en valeur, abatement in value: as in Germany, and now also in France since 2007). Common lawyers refer to this pejoratively as “clawback”.33 Thus, there are and have been a number of rules in the civil law designed to prevent undue impoverishment of property owners and to ensure that the assets contained in the patrimony are retained there until the death of the property owner, when they are passed on intact to the (compulsory) heirs. Some of these rules have now gone. Some remain. A sale by the property owner can be attacked after his death in some circumstances (for example, lésion d’outre-moitié, loss of more than halfvalue,34 where a gross undervalue was paid), and if the sale is set aside, the thing returns to the patrimony and the purchase price is repaid. Formerly, at least, in one or two rare cases a sale could be set aside even where the sale by the deceased during his life was for the full market value (retrait lignager, return to the bloodline).35 D. USES OF PATRIMONY IN RELATION TO TRUSTS The notion of patrimony allows a civil lawyer to explain one or more aspects of the trust to himself. In particular, he may be trying to explain why the trustee segregates the trust assets from his personal assets, and why the trustee’s personal creditors may not be paid from the trust assets. The civil lawyer

 31 See e.g. the German BGB ss 2303-2338, French Code civil arts 912-928; C Castelein, R Foqué and A Verbeke (eds), Imperative Inheritance Law in a Late-Modern Society (2009).  32 Only “possible” because, whatever the position at the time of the gift, the deceased may die with no heirs close enough to demand reduction, or may before death become resident in or a national of another state having no provision for such reduction.   33 Again this is in stark contrast to the position in the common law world, where there is no réserve and no clawback: see P Matthews, “Imperative inheritance law, comparative law – United Kingdom”, in Castelein et al (eds), Imperative Inheritance Law (n 31) 123.  34 In France, see arts 1674 ff Code Civil; in Italy see art 1448 Codice Civile; in Jersey (where it is called déception rather than lésion), see Snell v Beadle 2001 JLR 118, and in Guernsey see Watson v Trouteaud (1987) 5 GLJ 6.  35 In France, see e.g. former art 841 Code Civil (repealed 1976); retrait lignager in Jersey was abolished in 1834, but in Guernsey only in 2008.



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may be tempted to see the trustee as owning (at least) two patrimonies.36 One is his personal patrimony, and the other is the trust patrimony. The trustee’s personal creditors can access the assets in the personal patrimony but not those in the trust patrimony. When assets leave the trust patrimony unlawfully, there are legal rules designed to ensure that they are returned to that patrimony. Thus Reid says: A trustee … has assets of two different types. On the one hand there are his private assets, the assets to which he is beneficially entitled; and on the other hand there are the assets which are held in trust. Two sets of assets means two separate patrimonies … But both patrimonies are held by the same person … Each ­patrimony forms a separate and exclusive fund. A creditor of one patrimony has no claim against assets which form part of the other patrimony. If an asset is sold or exchanged, the proceeds of the sale or exchange are allocated to the patrimony from which the asset was taken … A trust patrimony can become bankrupt in the same way as a private patrimony … and it is possible for one patrimony to be solvent while the other is insolvent. If a trustee dies, his private patrimony passes to his heirs and is broken up, while the trust patrimony lives on, in the hands of a new trustee.37

And Gretton says: With the explanation of trust as patrimony everything falls into place. The rights of beneficiaries are personal rights. They are personal rights against the trustee, enforceable against the special patrimony. (And sometimes, depending on the legal system and the circumstances of the case, against the general patrimony also.) Conversely, personal rights enforceable against the trustee in his personal capacity are not (in general) enforceable against the special patrimony. There is thus no need to seek to classify the right of beneficiaries as being in some way privileged or quasi-real or as in some way “trumping” the rights of the creditors of a trustee in his personal capacity.38

There are a number of difficulties with all this. The first is that the common law never had, and never needed, the patrimony idea in the form that it takes in the civil law. It simply does not exist in the common law. It therefore cannot be the original explanation for these aspects of the common law trust. It is true that common lawyers use the idea of the “estate”. But, despite

 36 F Sonneveldt and H van Mens (eds), The Trust: Bridge or Abyss between Common and Civil Law Jurisdictions? (1992) 5. Some common lawyers are similarly tempted: J E Penner, “Exemptions”, in P Birks and A Pretto (eds), Breach of Trust (2002) 241 at 253-254.  37 K G C Reid, “Trusts in Scotland”, in D J Hayton, S C J J Kortmann, and H L E Verhagen (eds), Principles of European Trust Law (1999) 67 at 68-69; see also K G C Reid, “Patrimony not equity: the trust in Scotland”, Ch 6 below at 116-118.  38 Gretton (n 3) at 100-101.

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being sometimes used as a direct translation in international conventions,39 this is quite different. This is the notion of assets which at a given moment in time belong to a particular person. In the common law it is in effect a snapshot of the economic position of a person on one of two or three events occurring, bankruptcy40 and death41 for sure, and possibly divorce as well.42 But it looks only at the assets at that moment, and not at future assets. (This is why there is no problem with the discharge of debts on bankruptcy.) And it is almost always a positive concept: the notion of an “insolvent estate” means only that whatever assets do exist will be distributed amongst creditors pro rata. No one has any obligation to pay the balance of the debts. In particular, the “heirs”43 never have any personal liability for the debts of the deceased. But if the trust is not a patrimony, the question may still be asked: is the deceased’s estate a patrimony? Smith thinks so; he says this: the estate in the common law has the same conceptual structure as the Scottish trust. The personal representative of the deceased acquires the deceased’s assets and his liabilities; but the personal representative is not personally liable on the liabilities that exist at the time of death. In other words, there is universal succession and the estate is a genuine patrimony.44

I have to say that I find this conclusion hard to accept. Whereas the heir, succeeding to a genuine, civil law patrimony is personally liable (at least in theory) for the debts of the deceased, the personal representative of the common law estate is not. He is liable only to the extent that he has assets from the deceased to pay them.45 His own personal patrimony (so to speak) is not liable. This seems to me like an important distinction between the two cases. The essence of patrimony, as it seems to me, is the transmission of the economic personality of the deceased to the next generation. But, if the personal representative does not personally owe what the deceased owed, without limit of assets, then he does not stand exactly in the shoes of the deceased. So in what sense is the deceased’s economic personality being  39 E.g. the Hague Convention on the Law Applicable to Trusts and on Their Recognition, The Hague, 1 July 1985, art 2.  40 Insolvency Act 1986.  41 Administration of Estates Act 1925.  42 See e.g. White v White [2001] 1 AC 596; Kennon v Spry (2008) 238 CLR 366.  43 But in England we do not use this term since the reforms of 1925. Even before then, it meant the person who inherited the land, which normally did not bear any of the deceased’s debts, rather than the next of kin inheriting the personalty (which did).  44 Smith (n 2) at 54.  45 Re Leng [1895] 1 Ch 652; Re Tankard [1942] Ch 69 at 72; Administration of Estates Act 1925, s 34, replaced as to insolvent estates by the Administration of Estates of Deceased Persons Order 1986, SI 1986 No 1999.



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transmitted? On the contrary, the administration of a deceased’s estate in English law looks much more like the liquidation of a company, and distribution to the members of any surplus remaining after all debts have been paid. Furthermore, as I have already said, the civil law idea of “patrimony” is significantly different from the common law one of “estate” in at least two other ways. One is that patrimony includes things of negative economic value as well as positive, that is, debts as well as assets, whereas the idea of the estate is positive only. The other is that patrimony includes future assets and liabilities, but estate is a statement of the present moment only. But there are other problems too with explaining trusts as patrimonies. One is that the civil lawyer starts in the wrong place. He is in error to suppose that a trustee has a (prima facie) duty to segregate trust assets from his personal assets, or the assets of another trust of which he is trustee, “a separate and exclusive fund,” as Reid says.46 Now, unless excluded by the terms of the trust, a trustee certainly has duties to bring the trust assets under his own or his agent’s control, and to deal with those assets according to the terms of the trust.47 And it is normal to segregate the trust assets from personal assets. Indeed, it is often a distinguishing feature, relied on by judges to show that a trust exists.48 But a trustee does not commit a breach of trust merely because he mixes trust and personal assets together.49 It is true that art 11(3) of the Hague Trusts Convention provides that Insofar as the law applicable to the trust requires or provides, such recognition [i.e. as a trust] shall imply in particular … (d) that the trust assets may be recovered when the trustee, in breach of trust, has mingled trust assets with his own property …

But this does not mean that a trustee commits a breach of trust just by mingling. For one thing, this paragraph only applies so far “as the law applicable to the trust requires or provides”. So it does not decide whether the proper law does in fact so require or provide. That is an enquiry still to be made.50 Secondly, the wording does not show that mingling must automatically be a breach of trust, only that, in some circumstances, it may be.  46 Reid, “Trusts” (n 37). As to Treuhand law, see BGH 21 April 1955.   47 Wyman v Paterson [1900] AC 271.  48 See e.g. Pearson v Lehman Bros [2010] EWHC 2914 (Ch).  49 See for example the discussion in Re Hallett’s Estate (1880) 13 Ch D 696, especially at 727-728 and 724-735, about mixing trust and personal funds in a single bank account, which proceeds on the basis that this is not in itself a breach of trust. Cf Penner (n 36) at 250. See also Re Harvey [1941] 3 All ER 284 (two charitable trusts to relieve poverty in similar terms could not be administered together as one fund without an order under Trustee Act 1925, s 57).  50 As for example Jersey law does: Trusts (Jersey) Law 1984, art 21(6).

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That said, there is no doubt that segregation makes it easier for a trustee to comply with his fundamental duties, such as to avoid conflicts of duty and interest, not to profit from his trust without authority, to invest and deal with, and to distribute, the trust property in accordance with the trust terms, and so on. Moreover, it commonly happens that a trustee mixes several trust funds together,51 and if separate patrimonies were the source of the segregation idea, presumably there would be a throwing-together of several patrimonies every time that were done. Rules52 have for very many years required solicitors to put all their clients’ money together in a single account, though it is held on trust for each of them separately.53 In modern times, financial assets (for example, bonds) are dematerialised, and holdings of the same class aggregated by a single trustee, even though belonging to different trusts.54 So the so-called duty to segregate, tout court, is a myth. Secondly, there is the (undoubted) rule that the personal creditors of the trustee cannot attach the assets belonging to the trust. But this does not show that the trust must be a kind of patrimonial concept. The rule concerned is one developed by the common law courts in the context of the law of the execution of judgments, and not by the courts of equity in the context of the law of trusts. It was and is legally wrong at common law for the court enforcement officer (formerly the sheriff) to execute on chattels in the hands of the judgment debtor knowing that they belong to another or are held on trust for another.55 If he does, and sells the goods, the creditor receiving the proceeds of sale will be accountable as a trustee.56 It is moreover the duty of a trustee whose trust assets are executed on to object and to protect the trust interests in any interpleader proceedings.57 Indeed, the rule that trust assets are immune from execution of judgments actually proves the opposite of what it should be if the trust was a patrimonial concept. If the trust assets formed a separate patrimony from that of the trustee, one would of course expect that the assets of that patrimony should be immune from action by the personal creditors of the trustee. And  51 For example a pension trust scheme for the employees of a company: cf Air Jamaica Ltd v Charlton [1999] 1 WLR 1399.  52 See now the SRA Accounts Rules 2011, replacing the Solicitors Accounts Rules 1998.  53 Twinsectra Ltd v Yardley [2002] 2 AC 164, [12], [70].  54 For example Euroclear, the Belgian financial services company specialising in the settlement of securities transactions and the asset servicing of such securities. See D J Hayton, Trusts and their Commercial Counterparts in Continental Europe (2002) 21-22.  55 Farr v Newman (1792) 4 TR 620 at 645; Cailland v Eastwick (1794) 2 Anst 381.  56 Foley v Burnell (1783) 1 Bro CC 274 at 278.  57 Wright v Redgrave (1879) 11 Ch D 24.



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it is so. What one would not expect is that the assets of the trust would also be immune from execution of judgments against the trustee in respect of debts contracted as trustee and for the benefit of the trust. Yet that is the law. The rule of the common law (at least in England) is that, with certain exceptions,58 judgments may only be executed against the beneficial property of the judgment debtor, here, the trustee.59 This is because liability has been assumed personally by the trustee, so it is his own liability. Of course, the trustee who has acted properly and is not himself in breach of trust has the right to an indemnity out of the trust assets.60 But the trustee (and not the creditor) takes the risk that those assets are sufficient, and liquid enough, for this purpose. Normally this means that the judgment creditor can be subrogated to that right, and so by that means can reach the trust assets.61 It may therefore be asked whether the trust creditor’s ability to be subrogated to the trustee’s right of reimbursement itself creates a trust patrimonial effect. Where it works, the effect is that trust assets go to pay trust debts and no others. At first sight that certainly looks patrimonial. But in fact it is not so. There are three points. The first is that, although a trust patrimony should work in all cases of trust debts, the subrogation effect is partial. So, for example, there will be no subrogation where the trust expressly or impliedly so provides,62 or the trustee is indebted to the trust (for example, has committed a breach of trust, and so either the liability was not properly incurred, or there is a separate breach, giving rise to a setoff against the right of recourse).63 Nor can there be subrogation where the trustee had no power to dispose of the assets in question. This was formerly a common phenomenon, especially for strict settlements, where the settlor did not wish the trust property ever to be disposed of. It can still happen today. An example is the case where a charitable trust has a permanent endowment, the capital of which cannot be applied to the objects of the charity. The trustee cannot recoup himself out of the permanent endowment, so he has no right to which creditors can be subrogated.64  58 The main one is that a charge may be imposed by charging order on any interest held by a judgment debtor where the judgment or order in respect of which the charging order is to be imposed was made against him as trustee of the trust: Charging Orders Act 1979, s 2(1)(b).  59 Re Morgan (1881) 18 Ch D 93; Jennings v Mather [1901] 1 QB 108, aff’d [1902] 1 KB 1; Smith (n 2) at 47.  60 Jennings v Mather [1901] 1 QB 108, aff’d [1902] 1 KB 1; Trustee Act 2000, s 31.  61 Re Pumfrey (1882) 22 Ch D 255; Re Frith [1902] 1 Ch 342.  62 Fraser v Murdoch (1881) 8 R (HL); 127 (1881) 6 App Cas 855.  63 See e.g. Re Johnson (1880) 15 Ch D 548.  64 Presumably, however, if the court could authorise the recoupment (e.g. under Trustee Act 1925, s 57), it could authorise the subrogation.

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The second point is that, if there is a right to subrogation but there are no or insufficient trust assets to which the creditor can be subrogated, the trustee’s own personal assets may be taken. But this conclusion cuts across the theory of patrimony. The trustee’s personal patrimony should not be paying trust debts. Yet the right of subrogation does not take away the personal liability of the trustee. The third point is that there is a question as to what happens if the creditor has such a right of subrogation, but the trustee becomes insolvent before the creditor can act upon it. Does the right of reimbursement, as a personal beneficial asset of the trustee,65 having priority to the beneficiaries’ own interests,66 fall into the bankrupt estate and become available for the satisfaction of all unsecured claims pro rata, or does the judgment creditor whose debt caused the right of reimbursement to come into existence in the first place somehow obtain priority? If the answer is the former, the patrimonial argument cannot be sustained, though it does not succeed merely because the answer is the latter. Smith suggests that the matter is still unresolved67 and points to the views that have been expressed in favour of the latter view.68 I am afraid that I disagree. In my view, if the trustee becomes bankrupt the matter is relatively straightforward, in English law at least. First, we should note that the trustee does not automatically cease to be trustee, at least not in English law,69 although the court may remove him from office as unfit.70 More importantly, the “bankrupt’s estate” vests in the trustee in bankruptcy once appointed.71 This expression is defined as “all property belonging to or vested in the bankrupt at the commencement of the bankruptcy”,72 except that it does not include “property held by the bankrupt on trust for any other person”73 (emphasis supplied). The trustee’s right of reimbursement is clearly within

 65 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42.  66 Dodds v Tuke (1884) 25 Ch D 617; Re Griffith [1904] 1 Ch 807.  67 Smith (n 2) at 49-50.  68 H A J Ford, “Trading trusts and creditors’ rights” (1981) 13 Melbourne U LR 1 at 19-24; D J Hayton, “Trading trusts, trustees’ liabilities and creditors”, in J Glasson and G Thomas (eds), The International Trust, 2nd edn (2006) 511 at 522; C Mitchell and S Watterson, Subrogation: Law and Practice (2007).  69 In Jersey the rule is different: Bankruptcy (Désastre) (Jersey) Law 1990, art 24(1)(a)(vi). As to charitable trusts, see the Charities Act 2011, s 178(1), case B.  70 See Re Barker’s Trust (1875) 1 Ch D 43; cf Re Bridgman (1860) 1 Dr & Sm 164.  71 Insolvency Act 1986, s 306.  72 Insolvency Act 1986, s 283(1)(a).  73 Insolvency Act 1986, s 283(3)(a).



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the first part of the definition, and, unless held on trust for a person and thus excluded under the second, it must be available to the creditors generally. It is perfectly clear that the trust creditor may be subrogated to the right in cases where there is no supervening bankruptcy, but subrogation in itself74 does not impose a trust, so it is difficult to see on what basis that right may be held on trust for him. E. JENNINGS v MATHER The leading English case on this point is Jennings v Mather.75 Smales Brothers, a partnership carrying on business, got into financial difficulties. The partners entered into a deed by which they assigned all their trade assets to a trustee, Mather, for the benefit of their creditors. As such trustee, Mather carried on the business, and properly incurred trade debts, i.e. trust debts, in acquiring further goods with which to trade. Jennings was one of the trade creditors. Not being paid, he sued Mather to judgment. Judgment not being satisfied, Jennings caused execution to be issued against Mather, and the sheriff seized some of the trade assets belonging to Mather and in his possession. But Mather himself was adjudicated bankrupt, and Gray was appointed his trustee in bankruptcy. Gray as such trustee claimed the seized goods from the sheriff. The sheriff, not knowing what to do, interpleaded, leaving it to Gray and Jennings to fight it out between themselves. The parties agreed that the goods concerned could be sold, and the proceeds were paid into court to abide the result of the interpleader. The county court judge before whom the interpleader was argued held that the trade goods seized by the sheriff were trust property, being held for the creditors of Smales Brothers. Hence, he considered, they did not pass to Gray as trustee in bankruptcy of Mather, under the then bankruptcy legislation.76 Thus in his view Jennings prevailed, and was entitled to the proceeds of sale of the goods. Gray appealed to the Queen’s Bench Divisional Court, and succeeded. A further appeal by Jennings to the Court of Appeal failed. There were two points. One was procedural: who had the burden of proving his case in the interpleader, the creditor or the trustee? The second was substantive: what rights did the judgment creditor and the trustee in bankruptcy respectively have in the goods? On the first point, the higher courts  74 Though as to subrogation to a security, see Banque Financière de la Cité SA v Parc (Battersea) Ltd [1991] 1 AC 221 (HL).  75 [1901] 1 QB 108, aff’d [1902] 1 KB 1.  76 Bankruptcy Act 1883, s 44; see now Insolvency Act 1986, s 283.

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held that the trustee in bankruptcy, once he had shown that he contracted as trustee, was presumed to have a right of reimbursement and a lien, and it was for the judgment creditor – assuming he had a sufficient interest to be heard at all – to prove that the trustee was guilty of such a default as to deprive him of that right. On the second point, the matter of substance, the higher courts agreed with the county court judge that the trade assets themselves were trust property. But from this they reasoned that the execution was unlawful, as trust property could not be the subject of a valid execution. On the other hand, and for the same reason, neither did the general property in the goods pass to Gray as Mather’s trustee in bankruptcy. However, Mather had a right of reimbursement in respect of the expenditure, supported by an equitable lien, and these rights were personal to Mather and so did pass to his trustee in the bankruptcy, by virtue of the then bankruptcy legislation (so far as material, in the same terms as the 1986 Act). Recalling that property held on trust for another is excluded by statute, this can only have been on the basis that these rights were not held on trust for the trust creditor. Hence, so far as they had value, they were available to the general creditors of Mather. Although a trust creditor might in ordinary circumstances execute his claim or judgment on the personal assets (and only the personal assets) of the trustee, such as the right to reimbursement was, yet here the bankruptcy of the trustee prevented any such execution. The creditor’s claim had instead to be made in the bankruptcy. Smith suggests that this case did not finally decide the point, since in the case as litigated there was no apparent “conflict between trust creditors and non-trust creditors”.77 Again, I respectfully disagree. The trustee in bankruptcy had to take account of the claims of both. The trustee in bankruptcy, representing both kinds of creditor, succeeded as against the trust creditor whose goods having been sold gave rise to the right to reimbursement and equitable lien in question. So there was a conflict between the trust creditor on the one hand and the trustee in bankruptcy, representing all creditors, on the other. F. OTHER POINTS There is a more general point, too. Assets held by the trustee as trustee for any other person do not pass to the trustee in bankruptcy, and are not  77 Smith (n 2) at 50, n 33.



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applied in the statutory trusts for the benefit of the creditors.78 But this is not because of a rule of trust law. It is simply a rule of insolvency law, just like the rules that exclude from the definition of bankrupt’s estate tools of his trade or other professional equipment and personal and family provisions for the basic domestic needs of the bankrupt and his family.79 It is part of the general policy of bankruptcy law. Moreover it is clear from the definition of “bankrupt’s estate” that only property held on trust for persons is excluded, and that that estate will include assets held by the bankrupt on trust for a purpose. Perhaps this expresses a policy that the trustee’s personal creditors should be paid before abstract purposes are satisfied. Or again, perhaps the trustee in bankruptcy indeed takes the assets, but subject to the purpose trusts (making them valueless to him). Or perhaps it is just an oversight by the draftsman. Of course, in English law the only purpose trusts which are valid and enforceable are those which are exclusively charitable.80 But it is not impossible that the trustee of a non-charitable purpose trust valid by the law of another jurisdiction should be resident in England and adjudicated bankrupt by the English court. In such a case the assets of that non-charitable purpose trust might be available to pay the trustee’s personal creditors. If so, this would simply reinforce the view that the trust is not to be explained by the concept of patrimony. G. PATRIMONY ON DEATH If we turn from the bankruptcy of the trustee to look at the no less weighty matter of his death, the case for a patrimonial basis for trusts in English law does not improve. Most trusts with individual trustees involve a plurality of them, holding trust property as joint tenants. When one dies, the ordinary law of joint tenancy means that there is no impact on the trust. The deceased trustee simply disappears from the picture, and the trust assets continue to belong to the surviving trustee or trustees. In the rare cases of a sole individual trustee who dies, all his assets – trust as well as personal – will vest in his personal representative. The personal representative, however, has power to appoint new trustees,81 and to vest the trust property in them, just  78 See in particular Insolvency Act 1986, s 324.  79 Insolvency Act 1986, s 283(2).  80 Re Endacott [1960] Ch 232. And it is very rare to find a charitable trust with a single individual trustee.  81 See the Trustee Act 1925, s 36(1)(b).

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as he or she might vest the beneficially owned assets in those entitled under the will or on intestacy. Where the trustee is a corporation (or more than one), such as a limited company, there is of course no “death”. The worst that can happen is for the company to be struck off the register and dissolved, any remaining assets vesting in the Crown as bona vacantia.82 But the discovery of assets held by the dissolved company on trust for others is a ground for restoring the company to life.83 Resurrection, no less. In practice however there is no need to go that far, as the court will on application make orders to vest the trust assets in new trustees,84 just as it can in other difficult cases, for example where a trustee is under disability, or out of the jurisdiction, and so on. H. SCOTTISH TRUSTS The trust, of course, is not confined simply to common law systems. There is the example of Scotland to consider. The Scottish legal system is heavily influenced by the civil law.85 On the other hand it is also influenced by English law, and is therefore generally referred to as a “mixed” legal system. In that system the trust has existed for more than 300 years. It is true that Scottish legal scholars have in recent times made considerable use of the patrimony idea in seeing how the trust can coexist with the largely civilian property law in Scotland.86 But this reliance upon patrimony appears to be anachronistic87 because, so far as I can see, the earliest trust cases in Scotland do not refer to patrimony. In what Reid88 refers to as “the leading modern study of the history of trust in Scotland”, Gretton89 goes through the cases in detail, and does not refer to a single instance of the use in any of these cases of the patrimony concept. Nor is there any such use in the

 82 Companies Act 2006, s 1012; see e.g. Re Wells [1933] Ch 29 (CA).  83 See Companies Act 2006, pt 31, ch 3.  84 Trustee Act 1925, ss 44(ii)(c) (land), 51(1)(ii)(c) (stock and things in action).  85 See e.g. W Gordon, “Roman law in Scotland”, in R Evans-Jones (ed), The Civil Law Tradition in Scotland (1995), ch 2.  86 See Gretton (n 3) at 97-103 Reid, “Trusts in Scotland” (n 37) at 68-69; but cf G L Gretton, “Scotland: The evolution of the trust in a semi-civilian system”, in R Helmholz and R Zimmermann (eds), Itinera Fiduciae: Trust and Treuhand in Historical Perspective (1998) 507 at 525-526.  87 Cf Gretton, “Scotland: The evolution” (n 86) at 518, where he asks whether the editor of Durie’s reports, in using the word “trust” in an early case “might … have succumbed to conceptual anachronism”.  88 Reid, “Trusts in Scotland” (n 37) at 68, n 3.  89 Cf Gretton, “Scotland: The evolution” (n 86).



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textbooks published before 2000.90 But in the last five years two textbooks have taken a different view. The first is Gretton and Steven’s Property, trusts and succession, which says this: The patrimony is the totality of a person’s assets and liabilities. The general ­principle is: one person, one patrimony. But in a trust, the trustee has two ­patrimonies. There is the ordinary, or general patrimony. And there is the special patrimony of the trust. Each has its own assets and liabilities. A patrimony is like a suitcase, with two compartments, one for assets and the other for liabilities. If an asset is sold, the asset leaves the suitcase but the price replaces it. The same happens in reverse if an asset is purchased. Again, if an asset generates income … the income forms part of the same patrimony. The trustee is under a duty of segregation, to ensure that the two patrimonies remain distinct, so that there can never be any question to which patrimony an asset belongs.91

The only authority cited for these statements is Gretton’s own paper, “Trusts without equity”.92 Moreover, I have not been able to find any authority in Scots law for the proposition which the authors state, that there is “a duty of segregation” of “the two patrimonies”. The trustee must certainly bring the trust assets under his control93 (as in English law), and undoubtedly it is normally convenient and safer for the trustee to keep the trust assets separate from his own, but that is all. What the Scots cases do make clear – also like the English – is that, if the trust creditor sues the trustee, and the trust assets are insufficient to satisfy the debt, the trustee’s personal assets are liable to be taken.94 Now, this is just not compatible with a patrimonial approach involving two distinct patrimonies. It falsifies one of the cardinal principles laid down by Reid, quoted earlier: “A creditor of one patrimony has no claim against assets which form part of the other patrimony”. The other textbook is the most recent edition of the prestigious general work, Gloag and Henderson: The Law of Scotland, differing in this respect from its predecessors. It now says that the trust property owned by the trustee “can be regarded as being in a patrimony separate from the trustee’s private

 90 E.g. K Norrie and E Scobbie, Trusts (1991); W Wilson and A Duncan, Trusts, Trustees and Executors, 2nd edn (1995).  91 Gretton & Steven, Property, Trusts and Succession (n 27) para 22.53 (emphasis supplied).  92 Gretton (n 3).  93 Ferguson v Paterson (1898) 25 R 697, aff’d sub nom Wyman v Paterson [1900] AC 271.  94 Cullen v Baillie (1846) 8 D 511; Cunningham v Montgomery (1879) 6 R 1333; Muir v City of Glasgow Bank (1879) 6 R (HL); 21 (1879) 4 App Cas 337. But it is otherwise if the trustee contracts “as trustee” (and this is the position in many of the states of the USA). See also Ritchie v Dickie 1999 SC 593, concerning the payment over of estate monies to a beneficiary entitled.

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patrimony”.95 For this proposition are cited, however, only two articles published in 2000, the one by Gretton96 and one by Reid.97 The book goes on to say98 that “Property in the trust patrimony is not attachable by any diligence of the trustee’s personal creditors”. But neither of the two (nineteenthcentury) cases cited for this proposition99 refers to patrimony or to the idea that trust assets form a separate patrimony. It goes without saying that legislation can expressly change the position, so that a non-patrimonial approach – like the English – can become patrimonial. This is the position in the trust laws of Jersey100 and Guernsey,101 where the trustee has informed the third party that he is acting as trustee. (Curiously, however, it is not the case in the Liechtenstein trust law.)102 And it is also possible that legislation could change a patrimonial approach – of the type Reid and Gretton describe – into a non-patrimonial one, where the trustee has to pay out of his personal assets if the trust assets prove insufficient. But, so far as I can see, the result in Scots law is the result of the judges’ decisions, and not of the intervention of the legislature. So my conclusion so far is that the patrimonial theory is an inadequate conceptual underpinning of the trust in England, and – it would appear on the evidence (perhaps we should say, not proven?) – also in Scotland. I. DEALINGS WITH TRUST PROPERTY A further question is how the doctrines of authorised and unauthorised dealing and of tracing impact on the theory of patrimony. It is notable that the Scottish commentators do not refer to them in support of their views that patrimony supports the trust. Yet you might have thought that they were relevant. They go to the important point that the trust fund is just that, a fund. This means that the replacement of one trust asset by another in an  95 13th edn, by H McQueen, Lord Eassie and others (2012) para 41.03, at 1032.  96 Gretton (n 3).  97 Reid, “Patrimony not equity” (n 37).  98 Ibid.  99 Gordon v Cheyne 1824 2 S 675; Heritable Reversionary Co v Millar (1892) 19 R (HL) 43. 100 Trusts (Jersey) Law 1984, art 32, as amended. 101 Trusts (Guernsey) Law 2007, s 42. 102 Although s 915 of the Personen-undgesellschaftsrecht (PGR) 1926 provides that “the trust property shall be regarded as separate property and the trustee’s creditors shall have no right of claim against the trust property”, s 916 goes on to provide that “the trustee is personally liable without limitation … for the debts incurred by him on behalf of the trust insofar as they cannot be met out of the trust property.” PGR 1926, as amended, as translated into English in B Jeeves, Liechtenstein Company Law, 2nd edn (1999).



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authorised transaction certainly changes the form of the property in which the beneficiaries’ interest subsists, and in an unauthorised transaction may do so, depending on such things as the status of the acquirer of the trust asset as a good faith purchaser for value of a legal interest without notice,103 and the possible ratification by beneficiaries of unauthorised transactions.104 Thus, the interest of the beneficiary in trust assets is essentially economic, rather than physical. This is surely what Reid was getting at, when he said that: If an asset [in a patrimony] is sold or exchanged, the proceeds of the sale or exchange are allocated to the patrimony from which the asset was taken. There is in other words real subrogation, or “tracing” in common law parlance …105

This is certainly putting the matter in a way characteristic of patrimonial thinking, even if common lawyers would not think of characterising proprietary claims to a substitute trust asset following a tracing exercise in such a way. But what is missing for civil lawyers who look at the trust is the sense of the vindicatory action by the owner who claims that an asset is his. The trust beneficiary cannot claim that he owns a given trust asset.106 In some cases he may be able to claim that the owner should make available the specific assets for him to enjoy. But he cannot claim to be the legal owner, and nor can he generally, while the trust lasts, stop the trustee from changing its form. So at best he can say that he has a claim to the enjoyment or to the value of the trust assets. J. WHY ADOPT A PATRIMONIAL APPROACH TO TRUSTS? The question is, why adopt a patrimonial approach to trusts? It cannot be because it better explains the existing rules. It does not. There is no significant benefit in stating the theoretical underpinning of the trust to be patrimony when the actual rules do not reflect that. Nor can any argument from mere “neatness”, that the picture is more aesthetically pleasing this way, be 103 It is often not appreciated by common lawyers that the concept of property in civil law systems is in fact more precarious than in common law ones. In most civil law systems the owner of a thing will lose his ownership if it gets into the hands of an acquirer (not always a purchaser for value) in good faith. Thus, the good faith purchaser exception for beneficial interests under trusts is not difficult for civil lawyers to accept. It is the persistence of the common law ownership of things now in the hands of good faith purchasers that they have problems with. 104 Foskett v McKeown [2001] 1 AC 102 at 129-130. 105 Reid, “Trusts in Scotland” (n 37) at 68. 106 Even if he first terminates the trust under the rule in Saunders v Vautier, he has only a right in equity to become legal owner. He does not acquire it just by demanding it.

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accepted. Law must serve the needs of society, not the other way round, and if, as a result of achieving the right results, bits of the model stick out in unattractive ways, that is just too bad. But perhaps the argument is simply that of analogy. How can we best explain the trust to those who do not know it? Well, we might use some quality which it has and which the persons to whom we are explaining it already understand. This is the “trust as chicken” argument. You ask me what alligator meat is like, and I tell you that it tastes like chicken. You know what chicken tastes like. So now you have a better idea what to expect from alligator meat. You may even think you can cook it, season it and serve it in the same way. In similar fashion you ask what a trust is like, and I tell you it is like a patrimony. The trouble with this argument is that it does not help a great deal, and indeed creates expectations that will be disappointed. To say that something tastes like something else does not mean that it is that something else, or that it possesses all or even most of the characteristics of that something else. It gives you only one limited piece of information (not necessarily accurate) about it. Worse, to say that a trust is “like” a patrimony is not just saying that they have something in common. Indeed, it is almost meaningless unless you mean that it has the same, or mostly the same, characteristics, or at least obeys similar rules. Unfortunately, as a matter of fact, it does not. It has just one (negative) characteristic in common with patrimony, namely, that the creditors of the trustee cannot take the trust assets on satisfaction of their debts, just as the creditors of one patrimony cannot take the assets of another patrimony in satisfaction of theirs. Put like that, however, this is small beer. Patrimony does not have any of the other important characteristics of trusts, such as fiduciary ownership, impact on third parties, role of the court, etc. And trust does not have any of the other important characteristics of patrimony, namely that everyone has one, and only one, and that it includes both assets and liabilities, both present and future. More importantly, there are other institutions that share the limited characteristic which they do have in common. A company’s or a partnership’s or a principal’s assets, for example, cannot be taken for the debts of a director of the company, a manager of the partnership, or an agent of the principal. But no one suggests that, therefore, a trust is “like” a company, a partnership or an agency. If, on the other hand, the benefit is to be that patrimony-like rules will have to be applied to trusts in future, then we need to look at the existing



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rules and see if they need changing. And, if so, what changes are needed? If those changes are in effect the ones that patrimony would bring, then all well and good. If, however, they are not, then again there is no benefit in a patrimonial approach. So the important thing would be to look at the existing rules to see if they needed changing, and, if so, how. The Trust Law Committee, an English group of judges, practitioners and academics,107 issued a consultation paper and a report on this subject in April 1997 and June 1999 respectively.108 Although the Committee in its consultation paper canvassed the possibility of reform implementing a patrimonial approach to trusts, professional opinion in the responses was divided on the desirability of this, and in its subsequent report the Committee did not recommend such an approach. Instead it recommended piecemeal reforms to deal with what it saw as the most serious of the existing problems. Subsequently, the Lord Chancellor referred the matter to the Law Commission and it formed part of the Commission’s ninth programme of law reform, of 22 March 2005.109 This stated that “[t]his project will commence when both current trust projects [i.e. on trustee exemption clauses and on capital and income in trusts] have been completed, which is expected to be no later than 2006”. The project was referred to again in the tenth programme, of 11 June 2008,110 as something still waiting to be done. But it was not mentioned in the eleventh programme, of 19 July 2011,111 or in the twelfth programme of 23 July 2014. So reforming the position of creditors of trusts is not likely in the short to medium term. Ultimately, the question is what changes, if any, should be made to the existing law. Only once that question has been answered will it be possible to consider whether a patrimonial approach will be suitable as a means of achieving those changes. K. CONCLUSION Given the modern tendency away from the classical theory of patrimony (including abolishing rules keeping property in the family, liberalising the reserved share rules, modernising company law, and so on), it seems 107 http://www.kcl.ac.uk/law/research/centres/trustlawcommittee/index.aspx 108 Available at http://www.kcl.ac.uk/law/research/centres/trustlawcommittee/consultationpapers. aspx 109 The Law Commission Ninth Programme of Law Reform (Law Com No 293) paras 2.36-2.40. 110 The Law Commission Tenth Programme of Law Reform (Law Com No 311) paras 3.31-3.33. 111 The Law Commission Eleventh Programme of Law Reform (Law Com No 330).

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c­ ounter-intuitive to use it to explain a common law idea where patrimony never played a part. The main argument for depicting the trust as a patrimony is that it purports to explain why the personal creditors of the trustee cannot take the trust assets for their debt. A subsidiary argument is that it seeks to explain the treatment of assets taken out of the trust fund and then restored to it. But English law, which after all created the trust, has never known the patrimony idea, and even in other laws which may have known it, such as the Scottish, the evidence in favour of its being the original explanation is lacking, and the theoretical arguments for so treating it in the future (i.e. regardless of the past) are weak.

5  Trust without Equity* George L Gretton**

A. INTRODUCTION 87 B. CAN THE TRUST BE EXPLAINED IN TERMS OF THE LAW OF OBLIGATIONS? 90 C. TRUST AS AGENCY? 91 D. DO THE BENEFICIARIES HAVE RIGHTS IN REM? 92 E. TRUST AS PATRIMONY 97 F. PATRIMONY AND PERSONALITY 103 G. TRUSTEESHIP AS AN OFFICE 106 H. DOES IT ALL MATTER ANYWAY? 106 I. SCOTS LAW 108 Perhaps the greatest difficulty the civilians have in accepting the trust is caused by what I have come to regard as an English peculiarity logically detachable from the trust, namely, the distinction between the legal and the equitable estate. In Scots law, which, even if it did not invent and develop the trust for itself but took it over from England – the point is doubtful – has accepted it without inhibitions or reservations, no such distinction has ever been known. There the trustee becomes owner and the beneficiary acquires a contractual right against him.1

A. INTRODUCTION For the comparatist the trust is problematic. For this there are two main reasons. The first is that the slogan of modern comparative law – “compare function rather than form” – does not work for the trust.2 One cannot identify the function of the trust because there is no such function. The trust

  * This article was originally published in (2000) 49 ICLQ 599.   ** Lord President Reid Professor of Law, University of Edinburgh. I would like to thank Lionel Smith for his comments.   1 F H Lawson, A Common Lawyer Looks at the Civil Law (1953) 201.    2 Despite this, valuable attempts to identify “trust-like” devices in non-trust legal systems have been made: see for instance H Kötz, Trust und Treuhand (1963); C de Wulf, The Trust and Corresponding Institutions in the Civil Law (1965); W A Wilson (ed), Trusts and Trust-Like Devices (1981).

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is functionally protean. Trusts are quasi-entails, quasi-usufructs, quasi-wills, quasi-corporations,3 quasi-securities over assets,4 schemes for collective investment,5 vehicles for the administration of bankruptcy, vehicles for bond issues,6 and so on and so forth.7 In software terminology, trusts are emulators. They are not even confined to private law. They can exist in public law, and can also straddle the private/public boundary.8 The second reason why trusts have proved so problematic for the comparatist is that there is a widespread belief that they are a special product of the common law tradition and, in particular, of its law/equity duality,9 and thus intrinsically mysterious to the civilian tradition. Trusts are supposed to be an Athanasian mystery. The Hague Convention on the Recognition of Trusts tells us that “the trust, as developed in courts of equity in common law jurisdictions and adopted with some modifications in other jurisdictions, is a unique legal institution …”.10 The trust is unique because it is founded on the division between law and equity and the consequent division of property rights into legal and equitable. The Privy Council has said that “the distinction between the legal and the equitable estate is of the essence of the trust”.11 Or again, in the International Encyclopaedia of Comparative Law Professor Fratcher writes:    3 Both non-profit quasi-corporations, such as the Inns of Court, and quasi-companies, with the shareholders being the beneficiaries and the directors the trustees. For a classic study see J H Sears, Trust Estates as Business Companies, 2nd edn (1921).    4 Quasi-mortgages, quasi-pledges, quasi-hypothecs etc. This may be done in three ways. (1) The debtor transfers assets to a neutral third party to hold as trustee for the lender and for the debtor. (2) The debtor may transfer to the creditor to hold as trustee for both parties. (Compare the Roman fiducia cum creditore and its modern versions.) (3) The debtor may declare a trust over his own assets with himself as trustee, holding for himself and the lender. All three of these patterns can be found in one jurisdiction or another.    5 The unit trust. Paradoxically, investment trusts, which are also collective investment schemes, are not trusts.   6 Debenture trusts.    7 “Si l’on demande à quoi sert le trust, on peut presque répondre: ‘à tout.’” (“What is the trust used for? Almost everything”. P Lepaulle, Traité théorique et pratique des trusts en droit interne, en droit fiscale et en droit international (1932) 12.) [Editor’s note: Ch 2 above provides an English translation of the first chapter of Lepaulle’s Traité.]    8 They are not even confined to national laws: they extend to public international law. See for instance C Redgwell, Intergenerational Trusts and Environmental Protection (1999).    9 “Though the English do not lay exclusive claim to having discovered God, they do claim to have invented the trust with two natures in one” (T B Smith). International Encyclopaedia of Comparative Law, vol 6, ch 2 para 262 (1976).  10 (Preamble.) As one usually finds in texts where two or more languages are authentic, there are significant differences between the authentic versions. The French text reads: “Le trust est une institution caractéristique crée par les jurisdictions de l’equité dans les pays de common law”.  11 Abdul Hameed Sitti Kadija v De Saram [1946] AC 208 (Ceylon) at 217 (Privy Council, quoting with approval R W Lee, Introduction to Roman-Dutch Law, 3rd edn (1931) 372).



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The trust is a legal device developed in England whereby ownership of property is split between a person known as a trustee, who has the rights and powers of an owner, and a beneficiary, for whose exclusive benefit the trustee is bound to use those rights and powers.12 … The interest of a beneficiary is … a property interest in the subject matter; it is not a mere personal or contract claim against the trustee. Neither trustee nor beneficiary has a mere ius in re aliena. In other words, the interests of both the trustee and the beneficiary in the subject matter are interests in rem.13 Because both the trustee and the beneficiary have, concurrently, in rem interests in the same subject matter, the creation of a trust normally involves a splitting of ownership.

The trust, it seems, is English, the trust is part of property law, and the trust is based on a separation between ownership in law and ownership in equity. Maurice Amos, also writing in comparative vein, took the same view: “the heart of the difficulty lies in the fact that trust property has two contemporaneous owners”.14 And yet there have been doubters. Lawson was one.15 Likewise, Bernard Rudden has written that “the orthodox explanation, given in terms of the traditional distinction between law and equity, provides only a historical and not a rational account of the trust”.16 The doubters are right. The trust does not have to be conceptualised within the framework of English law. The trust presupposes neither equity nor divided ownership. The ius commune tradition already has the categories with which to understand the trust. Scots law, which has known the trust since the seventeenth century and has more or less successfully integrated it within an almost pure ius commune system of property law, shows how.17  12 This passage is from vol 6, ch 11 at the beginning of para l. The following passage is from the same chapter at the end of para 3 and the beginning of para 4.  13 One may remark that since a ius in re aliena is itself a ius in rem this inference is hard to follow. The father of modern Dutch law, E M Meijers, wrote that “het Engelsche zakenrecht is en zijn constucties en ook in vele zijner regenlinen, eenige eeuewn bij die van het Europeesche vasteland ten achter” (quoted by H F W D Fischer at 1957, Tydskrif vir hedendaagse RomeinsHollandse Reg 25 at 35-36). This remark is so undiplomatic that it is better left untranslated. It is also less than fair, but passages such as that quoted in the text enable one to understand why Meijers descended to invective.  14 M S Amos, “The common law and the civil law in the British Commonwealth of Nations” (1936-1937) 50 HarvLR 1249 at 1264.  15 See for instance the quotation at the beginning of this article.  16 B Rudden, “Things as things and things as wealth” (1994) 14 OJLS 86 at 89. And cf the same author’s remark that “while the separation [between law and equity] may be the historical reason for the invention of the trust concept, it does not seem an adequate analytical reason, for it fails to explain the Scottish trust”. (B Rudden, “Equity as alibi”, in S Goldstein (ed), Equity and Contemporary Legal Developments (1992) 36).  17 This article has the ambitious aim of trying to catch the essence of the trust, whether used for private or for commercial purposes. Inevitably, however, it cannot investigate all the manifold uses to which trusts are put.

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B. CAN THE TRUST BE EXPLAINED IN TERMS OF THE LAW OF OBLIGATIONS? Can trust be explained as forming part of the law of obligations, perhaps as a special form of contract? To some extent it can.18 It is too seldom stressed that to be a trustee a person must so consent.19 He voluntarily undertakes the obligations of the trust. The civil law tradition is familiar with the fiducia cum amico,20 in which a person transfers the ownership of assets to another, for the purpose of administration, the recipient being bound – as a matter of the law of obligations – to administer them in a certain manner. How near does that go to the trust? One objection to seeing trusts as contracts is that the trust does not obey the dictates of privity theory, but then privity is hardly a universal truth, and even in the common law world is as honoured in the breach as in the observance. Stipulatio alteri can achieve a great deal, and indeed one may suspect that its historical absence from English law21 was a motive for the development of the trust, with its freedom from the shackles of privity. It is also true that the trust does not conform to classical notions of contract formation, but few today would regard that as a point of great significance. Nineteenth-century theories of contract formation have been eroded by experience and by reflection. Another possible objection to the attempt to understand the trust as a sort of contract is the fact that a beneficiary can in some circumstances hold liable a third party who acquires trust property in bad faith. This fact is often held up as an illustration of the semi-real nature of the beneficiary’s right. But nothing is more common than for legal systems to provide that if A breaks his contract with B as a result of collusion with C, C may have some liability to B.22 It does not follow that a right is real merely because the  18 Cf J H Langbein, “The contractarian basis of the law of trusts” (1995) 105 Yale LJ 625.  19 In the normal case. There can also be cases of trusteeship by force of law, without contract. But it is, after all, a general truth that obligations may arise ex lege as well as ex voluntate.  20 The Verwaltungstreuhand of German law corresponds to this form of fiducia. For fiducia in general in Roman law see Gai Inst 2.60.  21 England has recently made further inroads into privity by the Contracts (Rights of Third Parties) Act 1999. For privity and trusts see N G Jones, “Uses trusts and the paths to privity” (1997) 56 CLJ 175.  22 Tony Honoré has written that “the conclusion must be that civil law systems are capable of protecting the trust beneficiary by the doctrine of notice to the same extent as does English law by its recourse to equitable interests in property”. (T Honoré, “Obstacles to the reception of the trust? The examples of South Africa and Scotland”, in A M Rabello (ed), Aequitas and Equity: Equity in Civil Law and Mixed Jurisdictions (1997) 793).



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holder of that right can claim the protection of the law against interference by third parties.23 If C did not act in bad faith but took gratuitously, he may be liable to B, where A is a trustee and B is a beneficiary, but again this is not so surprising: all legal systems provide that gratuitous transfers are potentially reversible where the transferor is insolvent24 – and if he is solvent B should suffer no loss anyway. Another objection to the “obligational” view of the trust is that it does not explain why breach of trust may attract criminal sanctions. But this is not a special feature of the trust: persons in a fiduciary position may be prosecuted for fraud, and there are many fiduciaries apart from trustees. And the concept of a fiduciary exists also in the civil law tradition.25 In brief: trusts are capable of generating both third party rights and third party liabilities. But the same is true of contract law. There are, indeed, some differences, in these areas, between trusts and contracts, but the differences are matters of detail. The main difficulty in the obligational view of trusts is that it does not explain the effect of the trust in relation to the rights of creditors – the “insolvency effect”. This (the priority which the beneficiaries have over the trustee’s creditors) is surely the central fact of the trust which any theory must recognise and explain.26 If the trust is in its essence a contract, it will not defeat the rights of the owner’s other creditors. C. TRUST AS AGENCY? Something like a trust can be created by locating ownership in the “beneficiary”, and conferring on the “trustee” extensive contractual powers, including powers of alienation. Such an arrangement can involve “mandate  23 A point well made within the Anglo-American tradition by Harlan Stone: H Stone, “The rights of the cestui que trust” (1917) 17 ColumLR 467.  24 That is to say, the set of rules whereby donations, and other juridical acts, by an insolvent debtor, which have the effect of diminishing the value of the debtor’s estate, may be voidable at the instance of the unpaid creditors. The detailed rules vary from one legal system to another but (at least in the civil law world) all derive from the actio pauliana.  25 “Tutor rem pupilli emere non potest: idemque porrigendum est ad similia; id est ad curatores procuratores et qui negotia aliena gerunt” (D 18.1.34.7. “A tutor cannot buy a thing belonging to his ward; this rule extends to other persons with similar responsibilities, that is curators, procurators and those who conduct another’s affairs” (translation per Alan Watson’s edition).  26 This is so even though most reported trust cases do not turn on this issue. As a comparison, the central doctrine of company law is the separate personality of the company, even if most reported company law cases do not turn on this point.

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without representation”.27 If things are done in this way, the insolvency effect is explained: the creditors of the “trustee” are defeated, because it is the “beneficiary” who is the owner. In the bewind of Dutch law, and of the Roman-Dutch systems of southern Africa, we see this idea developed into a formal institution.28 But though it functions as a trust, the bewind is not a trust, for a simple reason: the location of legal title is the reverse of the trust.29 D. DO THE BENEFICIARIES HAVE RIGHTS IN REM? So is Professor Fratcher right in saying that “the trust is a legal device developed in England whereby ownership of property is split”?30 Is the Privy Council right to say that “the distinction between the legal and the equitable estate is of the essence of the trust”?31 Is Amos right to say that “trust property has two contemporaneous owners”?32 Is it true that “the dual division of title into formal or legal ownership and substantial or bonitary ownership is essential to the trust”?33 Turning the question around, is it true that “the … basic obstacle to acceptance of the trust [in legal systems with a civilian property law] is the concept of autonomous and indivisible ownership”?34 (It is important to emphasise that these quotations – and others in similar vein might be cited – were not intended by their authors to be confined to English law.)

 27 This conceptualisation of the trust was common in Scots law in the seventeenth and eighteenth centuries. Trust was often described as a combination of depositum and mandatum, with the depositum being a deposit of ownership rather than possession. See further Stair, Inst 1.13.7. and 4.6.3.; Bankton, Inst 1.18.12.; Erskine, Inst 3.1.32.  28 However, it does not seem to be used much in practice, either in the Netherlands or in southern Africa. In Heritable Reversionary Co v Millar (1892) 19 R (HL) 43 Lord Watson opined that in the Scottish trust the beneficiaries are the owners and the trustee has no real right – in the effect the bewind concept. But this was a maverick view, shared by no one before or since. Something like the bewind exists in the Ermächtigungstreuhand in Austrian law (see generally P Apathy (ed), Die Treuhandschaft (1995)).  29 Interestingly, South African legislation classifies the bewind as a sort of trust: see the Trust Property Control Act 1988. The South African view is that what is important is not so much ownership as control (see also H R Hahlo, “The trust in South African law” (1961) 78 SALJ 195). As against this, one may argue that if control, rather than ownership, is the test, then company directors would be “trustees”. But company directors, though occasionally called trustees, are fiduciaries but not trustees.  30 International Encyclopaedia of Comparative Law, vol 6, ch 11 para 1 (1974).  31 See n 11.  32 See n 14.  33 J Garrigues, “Law of trusts” (1953) 2 AJCL 25 at 33.  34 V Bolgar, “Why no trusts in the civil law?” (1953) 2 AJCL 204 at 210.



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Are beneficial rights proprietary, or real, rights? Is ownership divided? One reason why the question is so difficult is that it can be asked at different levels. As a question addressed to the individual systems of the common law tradition, the answer has to be affirmative.35 It is true that even within that tradition there have been doubters, but the “in rem” view has come to prevail. And it might be argued that that is the only level – the level of particular legal systems – at which the question makes sense. There is no Begriffshimmel, no “heaven of concepts”. But that is too short an answer. Lawyers from different traditions have to speak with each other, and not merely by way of academic debate. No one would say that, since “sale” has no absolute system-neutral meaning, therefore the Convention on the International Sale of Goods is a pointless exercise. And especially within the European Union we have to try to understand each other. The very existence of the Union, with its constantly-expanding sphere of Union-wide legislation, means that there has to be a system-neutral background of shared legal ideas. I do not wish to say anything of the idea of the ius commune europaeum novum except to observe that in some sense it must exist already, for Union legislation must use law-bound language. Thus there is a problem: a system-neutral language is both necessary and impossible. I cannot resolve this antinomy. What this article attempts to do, is to understand the trust from an admittedly civilian standpoint, but at least a standpoint which is not tied to any particular civilian system. And here Scots law offers a singularly good point of entry. It is a mixed system whose property law is a remarkably pure ius commune system,36 but which, nonetheless, has had the trust at least in a rudimentary form – since the seventeenth century – a far longer period than the other mixed systems – and which, moreover, has the trust as part of its unenacted law. The basics of the Scots law of trusts do not hang upon the construction of a statutory text.  35 Beneficial rights are personal rights in English law, it is true, but the key point is that they are also proprietary. Some scholars have agonised over this. Maitland: “If a foreign friend asked me to tell him in one word whether the right of the English Destinär (the person for whom property is held in trust) is dinglich or obligatorisch, I should be inclined to say: ‘No, I cannot do that. If I said dinglich, that would be untrue. If I said obligatorisch, I should suggest what is false. In the ultimate analysis the right may be obligatorisch, but for many practical purposes of great importance it has been treated as though it were dinglich, and indeed people habitually speak and think of it as a kind of Eigenthum” (H A L Fisher (ed), Collected Papers of Frederick William Maitland, vol 3 (1911) 321 at 326. For Maitland’s thoughts on how, historically, the beneficial interest evolved from a personal right into a quasi-real right, see his Equity ch 9 (at 112-114 of the 1949 edn). But Maitland’s views remain (that beneficial rights are not truly real) a minority one.  36 The standard text is K G C Reid, Law of Property in Scotland (1996).

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On that basis, and in that sense, what are the objections to regarding the right of a trust beneficiary as a real right?37 (1) A real right is presumptively valid erga omnes. By contrast, a beneficial right is not.38 (2) If the right of the beneficiary is real, how is it that a person acquiring from the trustee can take free from the rights of the beneficiary? If the beneficiary’s right is personal, the difficulty disappears: the third party is acquiring from the owner, and no other real rights affect the asset. (3) In international private law beneficial interests behave much more like personal rights than like real rights. (4) In general, real rights in immovables can be, and usually must be, registered, whilst personal rights do not need to be, and in general cannot be, registered.39 In this respect beneficial rights follow personal rights. (5) The rights of the beneficiary are transferable in the same manner as any personal rights, namely by assignment or cession, and not by the means used for the transfer of real rights. (6) Real rights are normally subject to the “principle of specificity”. They are like labels glued to particular things. Consider the paradigm examples: ownership, servitude, pledge. But beneficial rights attach not so much to things as to funds, whose contents are – or may be – constantly shifting while at the same time the fund continues as an entity. Where a beneficial right involves a right to a particular asset – as where A conveyed land to B for A’s own use while A went off to crusade – there may be some plausibility about describing it as real. That plausibility declines where the beneficial right is a right simply to money, without reference to any particular asset at all.  37 In the following I do not mention the well-known argument that a beneficial right in a trust cannot be a real right because of the numerus clausus of real rights. This argument is valid in the context of international private law, when the courts of Utopia (where the trust is now known) have to decide what effect to give, in Utopia, to a foreign trust. If Utopia has a numerus clausus of real rights, the right of a beneficiary cannot be real to the extent that it is subject to the internal law of Utopia. That is certainly a cogent position. But the numerus clausus argument is no answer to the argument that the beneficial right is indeed real in the jurisdictions which admit it. The nature and number of real rights was not fixed for all time by Ulpian or Tribonian or Accursius or Voet or Windscheid. It is a conception capable of change and development. If, say, French law wishes to adopt the trust, the doctrine of numerus clausus is no obstacle.  38 The fact that a purchaser in bad faith may be liable to the beneficiary has nothing very special about it: most legal systems have some such rule, whereby X, buying from an owner Y, in knowledge of Z’s personal rights against Y, may be liable to Z. (Details of the rule naturally vary from one jurisdiction to another.)  39 Obviously there is considerable variation between different systems, but this principle will be generally found to be reliable.



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(7) Beneficial rights are often indeterminate. It may be certain that a person is a beneficiary and yet it may be wholly uncertain what his rights are. It may even be wholly uncertain whether he will ever benefit at all – a strong example of this being the discretionary trust.40 Moreover, the very identity of beneficiaries may be indeterminate, as where a trust confers benefits on the unborn issue of a named person. Whilst personal rights can (more or less) be reconciled with this sort of thing, real rights cannot.41 Of course, some beneficial rights might be real and others not: but that seems rather arbitrary. (8) The central problem of the trust is to explain the insolvency effect – the fact that the rights of the beneficiaries are, in principle, unaffected by the insolvency of the trustee. If the rights of beneficiaries were real, that would be an explanation. Yet it seems to be accepted that there exist at least some kinds of trust where it is senseless to attribute equitable ownership to the beneficiaries. Charitable trusts are examples of this, as are other “purpose” trusts, and indeed even in discretionary private trusts arguably examples may also be found.42 Yet the insolvency effect operates in all trusts regardless of whether the rights of the beneficiaries are “real” or not. Thus the theory that beneficial rights are real does not even solve the problem for which it was created. It is – at best – the fifth wheel on the car.43 (9) It is often remarked that the trustee is treated as owner “only” as regards third parties, whilst as between trustee and beneficiary it is the beneficiary who is owner. But this is a muddle, and in fact the true conclusion is the opposite one: beneficial rights are in fact not real. Real rights are  40 The fact that, even within the conceptual structure of the common law, beneficiaries may have not rights in rem, is a point stressed by Maurizio Lupoi: see his Introduzione al Trust (1994) and Trusts (1997).  41 It must, however, be conceded that the civilian tradition has sometimes been rather wobbly on this point. Take Art 629 of the Austrian Civil Code (ABGB): “Das Eigentum des FideicommissVermögens ist zwischen allen Anwärtern und dem jedesmaligen Fideicommiss-Inhaber geteilt. Jenen kommt das Obereigentum allein; diesem aber auch das Nutzungseigentum zu” (The ownership of entailed property is split between the heirs in expectancy and the heir in possession. To the former belongs the dominium directum; to the latter the dominium utile.) This was, understandably, disapproved of by the pandectists as being uncivilian. It was repealed immediately after the Anschluss in 1938, and was not revived with the restoration of Austrian independence. Thus the Nazis spread that Pandectism of which they disapproved. This one codal provision deserves an article to itself.  42 For discussion see e.g. R A Pearce and J Stevens, Law of Trusts and Equitable Obligations (1998) 418-420.  43 A connected point is that the trusts assets themselves may be partially or wholly personal rights (even “equitable” rights), and it could hardly be that the rights of the beneficiaries are real while those of the trustee are personal.

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defined primarily in terms of third party effect.44 The fact that in third party terms – for instance in suing an intruder for trespass or registering a title – it is the trustee who is owner shows where ownership lies. There is nothing mysterious or puzzling about an owner who undertakes, by way of obligation, to hold the whole benefit for someone else: to call that “divided ownership” is mystification.45 The Court of Justice has been obliged to consider whether a beneficial right is a real right in the context of Article 16 of the Brussels Convention.46 This provides that in an action concerning “rights in rem in immovable property” jurisdiction belongs to the courts of the country where the property is situated. Quoted here is the official English translation. The original text was of course not drafted in English. The French text speaks of droits réels immobiliers. A Scots lawyer would not translate this as “rights in rem” but as “real rights”,47 but EU texts and international conventions naturally have their English-language version framed in terms of English law, and the same is true when they are transposed into domestic UK law by Westminster legislation. Though natural, this can be problematic for the Scots lawyer, as the present example illustrates. In Webb v Webb48 the Court of Justice had to decide what Article 16 meant in relation to trusts. A father bought property in France but arranged for the son to be registered as owner. Later they fell out, and the father sued in the English courts for a declaration that the son held for the father on trust. One line of defence for the son was that this was an action in rem and so the English courts did not have jurisdiction. The Court of Appeal referred the matter to Luxembourg, which held that Article 16 did not apply, because the action did not concern real rights in French property. There has been some disquiet in England about this decision. To a Scots lawyer it looks obviously correct. In Scots law the right of a beneficiary is a personal right and not a real right. So what conclusion can we draw from the decision? The natural conclusion is that the term right in rem as used by lawyers in the common  44 Robinson Crusoe had no law. When an island has two people, there must be law – ubi societas ibi ius – but only personal rights are needed, not real rights. Real rights will arrive with the third castaway.  45 A similar muddle occurs in the Sale of Goods Act 1979. The heading above s 16 reads: “Transfer of property as between seller and buyer”.  46 Transposed into UK law by the Civil Jurisdiction and Judgments Act 1982.  47 Other European languages use the local vernacular term too, not the Latin. It is curious that it should be English law that uses the Latin phrase. Presumably this is because the traditional meaning of “real” in English law is “immovable”.  48 Case C-294/92 [1994] ECR I-1717.



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law tradition does not precisely correspond to the civilian conception of a real right.49 Right in rem is a wider conception: it includes rights regarded as real rights in the civilian tradition but it includes some other rights too. Hence the official English version of Article 16 is a mistranslation. Or at least so it seems when viewed from north of the border, and also, it seems, from Luxembourg. A connected terminological point concerns the word “proprietary”. In the common law systems it is natural to distinguish remedies (and rights) into personal and proprietary. When translating into civilian terminology, one must be careful. Many “proprietary” remedies and rights are, in civilian terms, real, but others are not. For instance, it is unclear to what extent Scots law recognises a right to trace. But to the extent that it does, the right is not classifiable as “proprietary”,50 since the tracer has no real right. The point is primarily linguistic rather than substantive. The legal realist will be impatient with all this agonising about whether a right is real or not. Concepts should be our servants and not our masters. But we cannot escape formalism. Those who claim to reject formalism are fellow formalists with a rival theory of their own. E. TRUST AS PATRIMONY The concept of patrimony is that of the totality of a person’s assets, and, in its broader sense, his liabilities also. It is sometimes supposed to have been an invention of nineteenth-century legal scholars. That view might seem to receive support if one looks at most standard texts on Roman law, which refer to patrimonium only in the sense of the patrimonium caesaris, the imperial patrimony. But that view is quite wrong. For example, only a little research in the sources is necessary to show that the later civilian concept of patrimony, or something pretty near it, already existed in Roman law. The word patrimonium is used in this sense by Papinian,51 by Paul,52

 49 “It is almost impossible to convey to continental lawyers the exact sense in which an English lawyer uses the terms in rem and in personam”. H C Gutteridge, Comparative Law (1946) 123. That is perceptive. One might add that it is almost impossible to convey to Anglo-American lawyers the exact sense in which a civilian lawyer uses the terms “real” and “personal”.  50 The word “proprietary” is not normally used in Scots law, being a word heavily laden with the doctrines of English equity.  51 D 31.77.19.  52 D 10.2.38.

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by Pomponius,53 by Scaevola,54 and by Ulpian.55 The concept was to be developed later in the civilian tradition, but it has been there from almost the beginning. What happened in the nineteenth century was, rather, a reaction against the idea of special patrimonies and in favour of a single general patrimony.56 This is not the place to elaborate on the concept of patrimony, though it may be observed that one of its benefits is to remove a terrible temptation: the temptation to equate what is mine with what I own. All my rights are mine, but not all my rights are rights of ownership. One of the first lessons of property law is to distinguish real rights from personal rights, and, amongst the real rights, to distinguish ownership on the one hand from the limited real rights on the other hand. If I am owner of a thing and enter into an unexecuted contract of sale with you, my patrimony still, at this stage, has the real right, while in your patrimony there is a personal right. In my patrimony there is also a personal right, to the price, while in the larger sense of patrimony we both have obligations: my obligation to convey and deliver and your obligation to pay and accept. The concept of patrimony, or something much the same, is known also to English law, under the name of “estate”,57 or, sometimes, “fund”.58 “Estate” has more than one meaning, but in the sense of winding up the “estate” of a deceased person, or administering the “estate” of a bankrupt, the word is being used too in the sense of patrimony. In general, the principle is: one person, one patrimony. Everyone has a patrimony, no one has more than one. But the civilian tradition admitted qualifications to this principle. As well as his ordinary patrimony, a person could sometimes have a “special patrimony” (such as dos or peculium in  53 D 46.6.9. This passage, however, excludes claims (nomina) from the concept. That is different from the modern concept. The fact that Roman law at that time had not fully developed the institution of cessio (assignment) is a partial explanation.  54 D 12.6.61.  55 D 5.3.25. These citations are illustrative, not exhaustive.  56 “It has often been considered in civil law countries that ‘each person has a patrimony, each person has only one patrimony.’ This construction is essentially due to the reading by some French authors of some provisions of the French Civil Code”. M Grimaldi and F Barrière, “Trust and fiducie”, in A Hartkamp (ed), Towards a European Civil Code, 2nd edn (1998) 578.   57 Herbots has written that “English law has … no theory either of estate or of personality” (“Het Engels recht kent … geen theorie van het vermogen, noch een theorie van de rechtspersoon”). J H Herbots (ed), Le trust et la fiducie (1997) 7. That goes too far, though one can see why, from a continental standpoint, Herbots was tempted to say it.   58 There is not much discussion of the concepts of patrimony and special patrimony in the English language. On this lack see T Ansay, “Third way?”, in J Basedow, K J Hopt and H Kotz (eds), Festschrift für Ulrich Drobnig (1998) 481. 



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the Roman law). For example, matrimonial property regimes sometimes necessitated the existence of a special patrimony.59 In such a special patrimony there is real subrogation, i.e. the principle that a thing bought with money from that source was part of that special patrimony, and conversely.60 Thus the assets of the special patrimony are segregated from the general patrimony, and to some extent the civilian tradition has likewise accepted segregation of liabilities also. Real subrogation is the key to the doctrine of patrimony, and patrimony is the key to the trust. In other words, a trust is a special patrimony. There is nothing surprising about this conclusion,61 except that it has not been more widely understood. One frequently meets continental lawyers who fret and puzzle about the trust, to whom the trust is an arcanum, to be understood only in terms of the mysteries of equity, those who have swallowed whole that remarkable statement in the preamble to the Hague Convention on the Recognition of Trusts about the trust being a “unique legal institution” which was “developed in courts of equity in common law jurisdictions”, those who accept at face value the assertion that the right of the beneficiary is a right in rem. Yet the civilian tradition actually has and has always had the appropriate concepts.62 There is an irony here. Three pictures follow. The first shows the ordinary case of one person and his patrimony, the patrimony being a bag with two parts, namely the liabilities and the assets. The second is the case of the person who is also a trustee: it illustrates the essential principle of one person, but two patrimonies. The third shows the trust which has two trustees. Their title is a “joint” one, as opposed to co-ownership: that is a necessary feature of the trust.63  59 In which case it should perhaps have been called a matrimony.  60 For the history, see A Welle, In universalibus pretium succedit in locum rei, res in locum pretii: eine Untersuchung zur Entwicklungsgeschichte der dinglichen Surrogation bei Sondervermögen (1987).   61 The point was developed by the French comparatist Pierre Lepaulle in his Traité (n 7). This is one of the seminal treatments of the subject. One area where Lepaulle’s thought was influential is Latin America (it was eventually published in a Spanish version in Mexico: Tratado Teórico y Práctico de los Trusts (1975)). For Lepaulle’s thoughts near the end of his life see “The strange destiny of trusts”, in R Pound, E N Griswold and A E Sutherland (eds), Perspectives of Law: Essays for Austin Wakeman Scott (1964) 226.  62 To what extent the civilian concepts go back to Roman law itself, and to what extent they are post-Roman developments, is open to debate. H P Glenn concludes that “the trust … is part of a pan-European tradition and was developed in opposition to another pan-European tradition, that of Roman law”. (“The historical origins of the trust” in Rabello (ed), Aequitas and Equity (n 22) 749). Glenn’s essay is of value but the second part of the sentence quoted goes too far.  63 Joint ownership may be compared with the Gesamthandeigentum as opposed to the Miteigentum of German law.

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Assets Liabilities

Assets Liabilities

Assets Liabilities

General patrimony

General patrimony

Special (trust) patrimony

Assets Liabilities

Assets Liabilities

Assets Liabilities

General patrimony

Special (trust) patrimony

General patrimony

With the explanation of trust as patrimony everything falls into place. The rights of beneficiaries are personal rights.64 They are personal rights against  64 Are they founded on promise or on contract? Or perhaps they are another form of voluntary obligation? I would analyse the trust obligation as a special form of promise. But the question is probably of limited importance. A more interesting question is whether beneficiaries need to have any rights at all. It may be that benefit can be separated from enforceability, and in fact this is one of the current issues in international trust law. For perceptive discussion see P Matthews, “The new trust: obligations without rights?”, in A J Oakley (ed), Trends in Contemporary Trust Law (1996) 1. See also P Baxendale-Walker, Purpose Trusts (1999). A trust of this sort is especially problematic in legal systems which recognise the division of ownership, for it means that the trustees have legal ownership (and nothing more) but the equitable ownership is in a void. Actually this is yet another argument to show that beneficial rights cannot be real.



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the trustee,65 enforceable against the special patrimony. (And sometimes, depending on the legal system and the circumstances of the case, against the general patrimony also.)66 Conversely, personal rights enforceable against the trustee in his personal capacity are not (in general) enforceable against the special patrimony. There is thus no need to seek to classify the right of beneficiaries as being in some way privileged or quasi-real or as in some way “trumping” the rights of the creditors of a trustee in his personal capacity. There is no need to resort to duality of ownership. Instead of duality of ownership, there is duality of patrimony. As for the fact that a trust estate is a “fund” the constituent items of which may change without changing the identity of the fund, this is of the essence of the idea of a patrimony. It is also essential to the trust concept. Indeed the chief reason why the German Treuhand falls short of the trust is that in the Treuhand real subrogation does not fully operate.67 (There may, indeed, be subrogation (Surrogation) in respect of the “internal” relationship, that is to say, as between Treuhänder and Treugeber, but this has no “external” effect.) Far from beneficial trust rights having priority, they are in fact postponed claims. For if a trust becomes insolvent, the claims of the beneficiaries are postponed to the claims of those who are creditors of the trust. If anything needs to be explained, it is this fact. But the explanation is not difficult. It is the explaining of priority which is difficult – very difficult indeed unless one invokes the idea of a real right. But explaining postponement is unproblematic. (And no one would seek to argue that ordinary creditors of a trustee all have real rights.) The conception is simple: a beneficial right is a  65 Lepaulle did not agree. For him the rights of the beneficiaries, though personal, were enforceable against the trust rather than against the trustee. Likewise, the duties of the trustees were owed, not to the beneficiaries, but to the trust itself (Traité (n 7) 42-44). This view of matters virtually turns the trust into a juristic person. Thus shareholders have rights against the company, not against the directors, and directors owe their duties to the company, not to the shareholders.  66 These personal rights form, of course, part of the beneficiary’s patrimony.  67 The German Unmittelbarkeitsprinzip, according to which assets held in Treuhand are protected from creditors of the Treuhänder only if they are the original “trust” assets – i.e. the exclusion of real subrogation – strikes me as lacking a stateable basis in legal doctrine. If there is a special patrimony then there must be real subrogation. If there is no special patrimony, the immunity to creditors is inexplicable (unless the right of the beneficiary is real). Kötz admits that the insolvency effect of the Treuhand is “incompatible with the theory that the beneficiaries’ interest in the Treuhand res is a mere right in personam” (H Kotz, “National report for Germany”, in D J Hayton, S C J J Kortmann and H L E Verhagen (eds), Principles of European Trust Law (1999) 85 at 94). The term “quasidinglich” which is sometimes encountered in the German literature merely masks the problem. The current German law lacks conceptual coherence. It may be added that Kötz has taken the view that the refusal of the German courts to allow real subrogation in Treuhand does not reflect any basic principle of German law (see H Kötz, “Die 15 Haager Konferenz und das Kollisionsrecht des Trust” (1986) 50 Rabels Z 562 at 579-580).

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­ ersonal right which is to be met only when creditors have been provided p for. (Indeed, in commercial transactions subordinated debt is common and can be created purely by contract.) The patrimonial conception of the trust also explains, or at least underlies the explanation of, other features. It helps to explain why a trust will not fail for want of a trustee, so that even if all the trustees die the trust continues, and new trustees can be appointed.68 It helps to explain how it is that a court can take a trust out of the hands of the existing trustees and place it in the hands of new trustees. It explains why a trust estate, as such, can be made bankrupt, at any rate in Scots law69 and in South African law.70 So can trusts be located in the civil law taxonomy of private law? They can. Trusts do, indeed, impinge deeply upon both the law of obligations and the law of property, but they do not belong essentially to either. They belong to the doctrine of patrimony, and the doctrine of patrimony belongs to the law of persons.71 The trust is itself not a person. A special patrimony never is. But a special patrimony operates very like a person, as an autonomous, quasi-personal, fund. The patrimonial model of the trust here advanced is not an original one. Others have said much the same. According to the Principles of European Trust Law,72 “in a trust, a person called the ‘trustee’ owns assets segregated from his private patrimony and must deal with these assets for the benefit of another person called the ‘beneficiary’ or for the furtherance of the trust”. Liechtenstein law provides that “the trust estate is to be treated as a separate patrimony and the creditors of the trustee have no claim on it”.73 Again Tony Honoré has written that “the trust estate is a separate fund vested in the trustee … The conception of a separate fund is not confined to common law systems. Other systems of law admit or have admitted the idea: for example the peculium of Roman law, the patrimoine d’affectation of French law,  68 A point which Lepaulle considered to be of the highest significance.  69 Bain Ptr (1901) 9 SLT 14; Bankruptcy (Scotland) Act, s 6(l)(a).  70 Magnum Financial Holdings (Pty) Ltd v Summerly 1984 1 SA 160.  71 This is their home, but like most items in any taxonomy there are cross-overs, and it cannot be denied that trusts must be mentioned under the heads of obligations and property. Those who are sceptical of this whole approach will say that this is tantamount to admitting the trust as an autonomous conception that cannot be located in the taxonomy. I would not agree. After all, the entirety of the law of persons, natural and juristic, is permeated by the law of obligations and the law of property.  72 Hayton et al (eds), Principles (n 67).  73 “Das Treuhandvermögen [ist] als Fremdvermögen zu betrachten und es haben daher die Gläubiger des Treuhänders hierauf keinen Anspruch”. Personen-und Gesellschaftrecht Art 915 (Text from M Lupoi, Trust Laws of the World, vol 2 (2000) 1159.



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the Sondervermögen of German law”.74 F H Lawson remarks that “in the common law countries a Sondervermögen can easily be created by means of a trust”.75 Frans Sonneveldt observes concisely that “the trustee has actually two patrimonies”.76 The Hague Convention on the Recognition of Trusts77 is of particular interest to the comparatist since it attempts to explain the trust in a more or less system-neutral manner: The term “trust” refers to the legal relationship created – inter vivos or on death – by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose. A trust has the following characteristics: (a) The assets constitute a separate fund and are not part of the trustee’s own estate. (b) Title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee …78

This may not be perfect, but it avoids equity and divided ownership, and “separate fund” is special patrimony.79 F. PATRIMONY AND PERSONALITY In Roman law universitas meant a group, considered as a unity. A flock of sheep was a universitas. As with sheep so with persons: groups of people, considered as a group, was a universitas.80 A patrimony was a universitas. The haereditas iacens, which was what the patrimony was called after the death but before the entry of the heir, was a universitas. A universitas of this sort became known in the ius commune as a universitas rerum (or bonorum

 74 Honoré (n 22) at 812.  75 International Encyclopaedia of Comparative Law, vol 6, ch 2 para 42 (1976).  76 F Sonneveldt and H van Mens (eds), The Trust: Bridge or Abyss between Common and Civil Law Jurisdictions? (1992) 5.  77 Implemented in the UK by the Recognition of Trusts Act 1987.  78 The Convention is authentic in English and French. The French text reads: “Aux fins de la présente convention, le terme ‘trust’ vise les relations juridiques créés par une personne, le constituent – par act entre vifs ou à cause de mort – lorsque des biens ont étés placés sous le contrôle du trustee dans l’intérêt d’un bénéficiare ou dans un but déterminé. Le trust présente les caractéristiques suivantes: (a) Les biens du trust constituent une masse distinct et ne font pas partie du patrimoine du trustee. (b) Le titre relative aux biens du trust est établi au nom du trustee ou d’une autre personne pour le compte de trustee”. Masse can mean general or special patrimony, but tends to be used only in certain contexts, such as bankruptcy.  79 All the more curious that the Convention’s preamble (see earlier) is so unsatisfactory.  80 “Universitas alia rerum est, ut grex, peculium, hereditas; alia hominum, veluti collegium licitum, municipium, civitas, vicus, pagus”. J Voet, Commentarius ad Pandectas (Liber III, Titulus IV, I. One kind of universitas is of things, such as a herd or a peculium or a hereditas. The other kind is of persons, such as an authorised guild, a municipality, a city, a village or a canton.)

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or iuris)81 to distinguish it from a universitas personarum (or hominum).82 A universitas personarum was considered as a person – a corporation – in Roman law.83 Roman law did not quite take that step for the universitas rerum, though it came close to it in some cases, such as the haereditas iacens. But every such collectivity is potentially a person. “Universitas” itself has both meanings. Eventually the civil law tradition came to recognise two sorts of juristic person: the universitas personarum, the corporation, and the universitas rerum, the foundation.84 (The common law tradition has not gone down this road, recognising only corporations.)85 A foundation is a juristic person which is not a corporation. It has no members. It is an autonomous patrimony dedicated to a purpose – a Zweckvermögen. Some writers regarded the Zweckvermögen as having no owner at all. Others described it as owning itself.86 Others argued that it was “owned” by the “purpose” itself. Others again argued that notionally one could distinguish the juristic person (though memberless) from the estate which was owned: this latter is the dominant conception. All this casts light on a variety of difficulties. Article 1261 of the Quebec Civil Code reads thus: Le patrimoine fiduciare, formé des biens transférés en fiducie, constitue un patrimoine d’affectation autonome et distinct de celui du constituant, du fiduciaire, ou du bénéficiare, sur lequel aucun d’entre eux n’a de droit réel.87

 81 In German a Sachgesamtheit.  82 In German a Personengesamtheit.  83 Roman law did not have a developed theory of juristic personality, but the statement in the text can be defended from the charge of being anachronistic.  84 In Latin, French and German: fundatio, fondation, Stiftung. To what extent this conceptualisation was due to Savigny, and to what extent it is medieval, I am unqualified to discuss. On this see the work of R Feenstra, such as “L’histoire des fondations” (1956) 24 Tijdschrift voor Rechtsgeschiedenis 381, and “Foundations in continental law since the twelfth century: the legal person concept and trust-like devices”, in R Helmholz and R Zimmermann (eds), Itinera Fiduciae: Trust and Treuhand in Historical Perspective (1998) 305.  85 Both traditions have their conceptual problems: consider the corporation sole in English law and the Einmanngesellschaft in German law. (For the latter’s triumphant march across Europe see Council Directive 1989/667 OJ 1989 L395.)  86 “Als subjekt von Rechten und Verbindlichkeiten wird das Vermögen selbst gedacht, zu welchem sie gehören” (The patrimony itself is considered the subject of the rights and obligations which pertain to it). B Windscheid, Lehrbuch des Pandektenrechts, vol 1 at 223 of 8th edn.  87 The English text (which is also authentic) reads: “The trust property, consisting of the property transferred, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary, and in which none of them has any real right”. For discussion of this provision see J E C Brierley, “Regards sur le droit des biens dans le nouveau Code civil du Québec” (1995) 47 RIDC 33. For an attempt (before the new code) to come to terms with the trust see M Faribault, De la fiducie dans la province de Québec (1936).



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In Quebec law trust assets are ownerless. This, at first sight startling, conception is actually part of the civil law tradition: we have here the patrimony which is wholly autonomous, which has been divorced from any personality, but which has not become a personality in its own right. Lepaulle, who influenced the Quebecois conception, took the view that: “It is impossible to translate the rights of the trustee into those of an ‘owner’ in our [i.e. French or, more broadly, civilian] conception of property. He has neither usus nor fructus nor abusus”.88 One understands the logic, but it is not an inescapable one. Scots law, whose system of property law is at least as civilian as that of France, is able to say that the trustee is owner. Indeed, he does have the rights of usus and fructus and abusus: it is merely that he is under an ­obligation to use those rights for others. Personality and patrimony are not wholly separate concepts. Universitas could mean either. If one recognises personality one must recognise patrimony: personality implies patrimony. But in addition, as soon as one recognises a special patrimony, one is committed to seeing that patrimony either as a person or as a quasi-person.89 Special patrimonies tend to function as persons, and historically they have shown a tendency to become persons. Lepaulle suggested that it might be better to conceptualise trusts as persons.90 South African law at one time came close to doing so.91 The Quebec  88 “Il est … impossible de traduire les droits du trustee comme étant ceux d’un ‘propriétaire’ dans notre conception de la propriété. Le trustee n’a ni l’usus … ni le fructus … ni l’abusus”. P Lepaulle, “Réflexion sur l’expansion des trusts. Remarques à propos du livre de M Claude Reymond sur ‘Le trust et le droit suisse’” (1955) 7 RIDC 318 at 319. Usus, fructus and abusus were in the ius commune taken as the essence of ownership.  89 K W Ryan (at “The reception of the trust” (1961) 10 ICLQ 265) criticises Lepaulle for failing to distinguish between Zweckvermögen and Sondervermögen (special patrimony). But Lepaulle’s point is precisely that a trust is both a Sondervermögen and a Zweckvermögen. At n 21 Ryan writes that “the concept of Sondervermögen has … nothing to do with legal personality”. This is too strong. It is literally true that in the Gemeines Recht a Sondervermögen was not a person, and that remains true in, for instance, modern German law. But this literal truth misses the substantive truth.  90 For instance: “La solution la plus efficace et la plus simple est de doter le trust de la personne morale” (The most effective solution is to endow the trust with juristic personality). P Lepaulle, “R Molina Pasquel, La propriété dans le trust. Essai de droit comparé” (review) (1952) 4 RIDC 377. Ansay’s approach is comparable: see his valuable “Third way?” (n 58). Swiss international private law seems to treat foreign companies as persons: see N Poncet, “Trusts and Switzerland” (1998) 26 IBL 324.  91 See cases cited in T Honoré and E Cameron, Honoré’s South African Law of Trusts, 4th edn (1992) 53. South Africa is an interesting source of ideas as to how the trust should be integrated into a basically civilian system. The inter vivos trust tends to be explained on the basis of the stipulatio alteri. And until Braun v Blann & Botha NNO (1984 2 SA 850) the trust was often classified as a form of fideicommissum. The relationship between the fideicommissum and the trust is a subject which cannot be entered into here (see further D Johnston, The Roman Law of Trusts (1988)). Fideicommissary substitution is a long way from the trust, but the

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trust goes as far as it is possible to go without actually passing over into personality. Indeed, one might even ask whether, after all, that boundary has not in fact been crossed. In ordinary language the noun “trust” is a person-word. Idiom treats it like “company”. “This land is owned by a trust”. “These shares are held by a trust”. “Trusts are lucrative clients”. “The trust is liable for this debt”. Ordinary language is right.92 G. TRUSTEESHIP AS AN OFFICE In his various writings on trust law, Honoré has emphasised the concept of “office”, and through his influence this has become a key idea in South African trust law. The trustees may hand over to other trustees, and thereafter be freed from further responsibility: this is a form of universal succession, for the new trustees succeed to the whole assets and liabilities of the special patrimony, but it is a universal succession which can occur inter vivos. Moreover, the trustee, as the holder of an office, is removable and replaceable by the court: this is a striking contrast to purely contractual arrangements. The contrast with, say, the German Treuhänder is a striking one. Honoré argues that “it is the office that makes the difference between entrusting and trust”.93 The fact that a beneficiary who is dissatisfied with his trustee may ask the court to appoint a new trustee is so familiar that we forget how remarkable it is. Imagine a debtor who, if he is dissatisfied with his creditor, may ask the court for a better one. That is the trust. Honoré’s concept of office is an important one.94 Trust is patrimony, plus office. H. DOES IT ALL MATTER ANYWAY? Who cares how the trust should be conceptualised? One reason is that if there is to be legal science, Rechtswissenschaft, there must be taxonomy. In principle taxonomies can be changed: it may be said that if the trust does not ­ deicommissum purum is certainly trust-like. Fideicommissum was one of the sources of the fi Scottish trust.  92 If one thinks of a trust as a person, then trustees transmogrify themselves into representatives of that person, as directors are the representatives of a company. In this connection I cannot forbear to mention s 323 of the US Federal Bankruptcy Code which describes the trustee as being the “representative of the estate”. However, there can be little doubt that this personalisation of the estate was unintended.  93 Honoré (n 22) at 799.  94 There may be scope for debate as to whether the element of office is truly essential to the trust. (In South African law the answer is affirmative.)



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fit into a traditional ius commune taxonomy, then so much worse for the taxonomy. But altering a taxonomic system is as inconvenient as changing the classification system in an ancient library. If we are serious about law, trusts must be located in the system. Another reason is that the trust is expansive. It is expansive in that some jurisdictions have adopted it while others are thinking of doing so, and it is also expansive in that even those jurisdictions which do not have it increasingly often have to deal with trusts – even if they have not acceded to the Hague Convention on the Recognition of Trusts. How the trust should be conceptualised is thus a current issue. In 1992 a serious attempt was made to introduce the trust into French law.95 There are pressures to introduce it to Belgian law, to Dutch law and to other systems. One detailed proposal by a distinguished Belgian lawyer would provide that ownership is vested in the beneficiaries while the trustee has a “real right of administration”, an interesting conception which would be a sort of cross between the trust and the bewind.96 The issues discussed in this article are of practical importance. It is important that lawyers in the civil law tradition understand that the trust is not a “unique institution” and has no necessary connection with equity. Finally, clear analysis shows why the trust, though immensely useful, is also dangerous. Legal systems have tended to agree that juristic personality, because of its dramatic consequences, should be subject to certain conditions, including (with some minor exceptions) the requirement of publicity. Yet the trust, which can be created by a private and even secret act, comes close to being a juristic person. Seen in that light, one can understand why many legal systems have traditionally been so reluctant to recognise special patrimonies. Legal systems contemplating the reception of the trust should be conscious of the implications of such a reception.

 95 “La fiducie est un contrat par lequel un constituent transfère tout ou partie de ses biens et droits à une fiduciare qui, tenant ces biens et droits séparés de son patrimoine personnel, agit dans un but déterminé au profit d’un ou plusieurs bénéficiares conformément aux stipulations du contrat” (Fiducie is a contractual arrangement whereby a settlor transfers all or part of his assets and rights to a fiduciary, who holds such assets and rights separately from his personal patrimony, and acts according to a determinate objective for the benefit of one or more beneficiaries in accordance with the terms of the contract). French text from Sonneveldt & van Mens (eds), Trust (n 76) 68. For discussion see P Rémy, “National report for France”, in Hayton et al (eds), Principles (n 67) 131.  96 See M Storme, “La confiance est bonne, mais un dual ownership est préférable. Onze éléments essentiels à prendre en considération lors de l’introduction d’une figure similaire au trust ou contrat fiduciarie en droit belge”, in Herbots (ed), Trust et fiducie (n 57) 267.

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I. SCOTS LAW Scots law is a mixed system. Some areas are derived from English law, others are civilian, while others are home-grown. Scots property law is particularly civilian, and yet Scotland not only has the trust but has had it for a long time – at least since the seventeenth century – and has it by common law rather than by enactment97 (unlike those other civilian or mixed systems which have the trust, such as South Africa,98 Quebec,99 Sri Lanka,100 Louisiana,101 Mexico,102 Panama, Puerto Rico, Liechtenstein and so on). It is a native species, rather than an introduced one. It is integrated into the legal ecology. Especially and crucially, it is integrated into a property law system which is civilian.103 Everyone thinks his own system to be of galactic importance, but Scots law does have a special significance in the area of trusts. As such, it deserves the attention of comparatists, an attention which it has not sufficiently received. Lawson was an exception. Scots law locates ownership in the trustee,104 and classifies the rights of beneficiaries as simple personal rights, but yet has an apparatus of trust law which is, if not quite as extensive and sophisticated105 as that of English law, yet able to do pretty well everything that business people can fairly ask for. In saying this, I wish to make no special claim for the sagacity of Scots law. Scots law did not consciously take the concept of patrimonium and then develop it eleganter. A legal system which decides to have a trust concept which is to be functionally comparable to the English trust (and the English trust was, especially in the second half of the nineteenth century, a major influence on the Scottish trust), but which at the same time wishes to preserve its property law system and thus  97 For the origins of the trust in Scotland see G L Gretton, “Scotland: The evolution of the trust in a semi-civilian system”, in Helmholz & Zimmermann (eds), Itinera Fiduciae (n 84) 507.  98 See T Honoré, “Trust”, in R Zimmermann and D Visser (eds), Southern Cross: Civil Law and Common Law in South Africa (1996) 849.  99 See above. 100 See L J M Cooray, The Reception in Ceylon of the English Trust (1971). 101 See L Oppenheim, “The drafting of a trust code in a civil law jurisdiction”, in Wilson (ed), Trusts and Trust-like Devices (n 2) 137. 102 See further R Molina Pasquel, “The Mexican fideicomiso: the reception, evolution and present status of the common law trust in a civil law country” (1969) 8 Colum J Transnat L 54. This contains an account of the influence of Lepaulle’s thought on Mexican law. 103 But one must not exaggerate the clarity of Scots law in this area. The idea that the right of a beneficiary might be real was often toyed with, even in our own times. A leading scholar, W A Wilson, wrote in 1981 that the insistence of the Scottish courts that “the beneficiary has merely a personal right” was “regrettable” (Wilson (ed), Trusts and Trust-like Devices (n 2) 239). 104 Already in 1681 Lord Stair laid it down that whilst “the property of the thing intrusted, be it land or moveables, is in the person of the intrusted, else it is not a proper trust” (Inst 1.13.7.). 105 Nor quite as frightening for the civilian?



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is not prepared to accept equity, really has only one direction to move in. Even today it would be untrue to say that Scots lawyers have fully clarified their thinking about the nature of the trust.106 Nevertheless, Scots law has something here of interest to the world.107

106 Scottish universities should teach trusts as part of the law of persons, but, following English practice, they usually teach the subject as part of property law. And the Scotland Act 1998, in defining “private law” includes trusts under property, not persons. (See s 126. The definition is, incidentally, of the greatest interest to comparatists. It defines private law as (1) general part, (2) persons, (3) obligations, (4) property, (5) actions. This is the classical Roman taxonomy of personae, res et actiones (with “things” divided into obligations and property) plus the pandectist general part. 107 It is encouraging to see that the Scottish experience may prove influential if the Netherlands adopts the trust: see S C J J Kortmann and H L E Verhagen, “National report for the Netherlands”, in Hayton et al (eds), Principles (n 67) 195. The National report for Scotland (K G C Reid, “Trusts in Scotland”, in Hayton et al (eds), Principles (n 67) 67) in this volume is of value.

6  Patrimony not Equity: The Trust in Scotland* Kenneth G C Reid**

A. LAW AND EQUITY: A FALSE START B. CONTRACT + REAL RIGHT C. CONCEPTUALISING THE TRUST D. TWO PATRIMONIES E. DETACHED PATRIMONIES F. PERSONS, THINGS, OBLIGATIONS G. TRUSTEES AND BENEFICIARIES (1) Trustees (2) Beneficiaries H. CONCLUSION: PATRIMONY NOT EQUITY

110 112 114 116 118 119 121 121 122 123

A. LAW AND EQUITY: A FALSE START The opening words of William F Fratcher’s volume on Trust in the International Encyclopaedia of Comparative Law are these:1 The trust is a legal device developed in England whereby ownership of property is split between a person known as a trustee, who has the rights and powers of an owner, and a beneficiary, for whose exclusive benefit the trustee is bound to use those rights and powers.

This is a traditional definition. The trust, we are told, is English in origin, and its central feature is the division of ownership between trustee and beneficiary. At those words a lawyer from a civil law system is likely to be impressed but also discouraged: impressed, because the edifice of thought on which the English trust is based commands respect and admiration; dis-

* An earlier version of this paper was published in European Review of Private Law, volume 8, issue 3, pp 427-437, 2000 and is reproduced with the permission of Kluwer Law International. ** Professor of Scots Law, University of Edinburgh.   1 Vol 6, ch 11 para 1 (1973).



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couraged, because a device which depends on a division of dominium into legal and equitable ownership is not only unsuitable for transplantation to civilian soil: it is barely comprehensible. Trust law need not be like this. Indeed the argument of this chapter is that trust law is not like this. Even in English law the legal/equitable duality may no longer be the most important characteristic of the trust. But in any event trusts are not confined to English law, or to common law systems based on that law. Scotland, a mixed jurisdiction, has known the trust since at least the seventeenth century. In other mixed jurisdictions, notably South Africa, Quebec and Sri Lanka, trusts began to appear in the nineteenth century, with Louisiana following after the First World War.2 The law of property in mixed legal systems is always civilian;3 like civil law countries, they do not have a separate system of equity, or acknowledge the distinction between legal and beneficial ownership; and yet all mixed systems have the trust. Where mixed legal systems led, the civil law world in due course began to follow. Most of the early development was in Latin America – in Colombia (1923), Panama (1925), Chile (1925), Mexico (1926), Bolivia (1928), Peru (1931), Costa Rica (1936), Venezuela (1940), Nicaragua (1940), Guatemala (1946), Ecuador (1948) and Honduras (1950).4 In the civilian parts of Asia only Japan adopted the trust, in 1922, and the institution was largely ignored in continental Europe with the exception of tiny Liechtenstein (1926). In recent years the position has begun to change once again. Unexpectedly, Russia adopted the trust in 1993 and, just as unexpectedly, reconfigured it only two years later in the new Civil Code as a trust management contract.5 Trusts were introduced to South Korea in 1961 and, much later, to Taiwan in 1996 and China in 2001.6 Even Europe, traditionally hostile to the trust, has shown signs of succumbing to its charms. After a long period of gestation and controversy, France enacted legislation in 2007 to permit the fiducie, a trust or at least a trust-like institution albeit one which is subject to

  2 The history can be traced in the various contributions to J M Milo and J M Smits (eds), Trusts in Mixed Legal Systems (2001), a number of the chapters from which are also published at (2000) 3 ERPL 421 ff. In Louisiana, charitable trusts first became possible in 1882.   3 For a survey, see V V Palmer (ed), Mixed Jurisdictions Worldwide, 2nd edn (2012).   4 For details, see R Batiza, “The evolution of the fideicomiso (trust) concept under Mexican law” (1958) 11 Miami LQ 478 at 479. See also N Malumian, Trusts in Latin America (2009).   5 E Reid, “The law of trusts in Russia” (1998) 24 R Central & East European L 43; A A Zhdanov, “Transplanting the Anglo-American trust in Russian soil” (2006) 31 R Central & East European L 179.  6 For discussion see L Ho and R Lee (eds), Trust Law in Asian Civil Law Jurisdictions: A Comparative Analysis (2013).

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a number of limitations.7 Romania and the Czech Republic followed suit in their Civil Codes of 2011 and 2014 respectively. Previously, Luxembourg had introduced a fiduciary contract. And in other European countries, too, devices are in place which, while not full trusts, are at any rate trust-like in character,8 for example the fiduziarische Treuhand of Germany.9 What all of this suggests, of course, is an alternative model of trust. To the common law trust identified by Fratcher there must now be added the civil law trust – the trust developed first in the mixed legal systems and thereafter in countries in the civilian tradition. And of the civil law trusts, a special place may be claimed for the trust in Scotland, the oldest such trust by far and one of the most widely used in practice.10 In Scotland the history of private law is one of unbroken development from the Middle Ages onwards.11 There were wars but no revolutions. There was no civil code. There were no fresh starts. Gradually, foreign influences came to be combined with native ideas. So far as the trust is concerned, English influence was slight until the nineteenth century, and, at a conceptual level, the Scottish trust today remains utterly distinct. In this chapter, the civil law trust is approached through Scottish eyes. B. CONTRACT + REAL RIGHT An important preliminary question is whether anything is achieved by the trust which could not be achieved by other means. In its simplest form, a trust involves an arrangement whereby A gives property to B to hold for C. This looks like a contract between A and B in favour of a third party (C), and   7 See e.g. P Matthews, “The French fiducie: and now for something completely different” (2007) 21 Trust Law International 17. As well as offering an insightful analysis the author has included his own translation of the legislation. For more recent developments, including legislative amendments, see P Crocq, “National report for France”, in S C J J Kortmann, D J Hayton, N E D Faber, K G C Reid and J W A Biemans (eds), Towards an EU Directive on Protected Funds (2009) 99; F Barrière, “The French fiducie, or the chaotic awakening of a sleeping beauty”, in L Smith (ed), Re-imagining the Trust: Trusts in Civil Law (2012) 222.   8 A convenient survey can be found in Kortmann et al (eds), Towards an EU Directive (n 7). The question of whether an institution is a trust or merely “trust-like” will, of course, depend on the definition of trust selected.  9 H Kötz, Trust und Treuhand (1963). For a summary account by the same author in English, see D J Hayton, S C J J Kortmann, and H L E Verhagen (eds), Principles of European Trust Law (1999) 89. 10 As such, the Scottish trust has generated international interest, including one full-length study: A Stepkowski, L’institution du trust dans le système mixte du droit privé écossais (2005). 11 See generally, K G C Reid and R Zimmermann (eds), A History of Private Law in Scotland, 2 vols (2000). A history of trusts, by G L Gretton, can be found in ch 12 of vol 1.



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in Scotland there was at one time a fashion to explain trust in that way. For example:12 A trust is a contract made up of the two nominate contracts of deposit and mandate. The trust funds are deposited for safe custody, and the trustees receive a mandate for their administration.

In the same way, both fiducia cum amico and the German Treuhand are founded in contract. Of course, contract does not explain one of the best-known features of trust, namely that C’s claim against B is preferred to the claims of B’s private creditors. In other words, C has a preference in B’s insolvency. But this could be achieved by giving B a real right in the property. Naturally, a system with a strict numerus clausus of real rights would be bound to reject the idea of a special real right, formed for this purpose alone. But existing real rights will do. For example, B might be said to have a real right in security or – if the model of the Dutch bewind13 is followed – a real right of ownership. But a contract/real right model can, at best, explain only the simplest trusts. It cannot account for duration. Today trusts often last for as long as corporations. A trust can easily endure for 100 years or more. Duration creates problems of two different kinds. In the first place, the trustees will change. Probably they will change many times. After some years none of the original trustees will be in place, and the settlor14 will be dead. There is then no contractual nexus between settlor and trustees. Hence if trustees are bound – as they are – to comply with the terms of the trust, the source of that obligation cannot be contract. In the second place, the property will change. Shares in company X will be sold and shares in company Y bought in their place. In due course they will be replaced in turn by shares in company Z. The new assets substitute for the old. Once sold, the shares in company X cease to be trust property, and the shares in company Y become trust property in their place. This is real subrogation. In modern trusts (and especially in mortis causa trusts) it has become less common for the beneficiary to have a right to a particular asset, such as a house or jewellery. Much more usually, his right is merely to money or other non-specific assets – to a proportionate share of a fund 12 Croskery v Gilmour’s Trs (1890) 17 R 697 at 700 per Lord President Inglis. 13 In a bewind, ownership is in the beneficiary, and the trustee merely has a right of administration. Bewind is found in Dutch law, and also in South Africa. 14 In Scots law (and in Book X of the DCFR, discussed below), “truster” is used instead of “settlor”, which is a term of English law. Nonetheless it will be convenient to use “settlor” in the present chapter.

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comprising property held as investments. But this economic arrangement is incompatible with a real right in the beneficiary. A real right requires a stable and identifiable res. In many trusts there is none. C. CONCEPTUALISING THE TRUST A trust, then, is not merely an amalgam of concepts familiar from the Corpus Iuris Civilis. It is something new, and requires to be explained. For a long time jurists in Scotland struggled with their explanations. It had been settled almost at the beginning that ownership was in the trustee. Viscount Stair, writing towards the end of the seventeenth century, declared that “the property of the thing intrusted be it land or moveables, is in the person of the intrusted, else it is not a proper trust”.15 But the difficulty was to explain the position of the beneficiary. Opinions varied.16 One possibility, as traditionally in England, was that the beneficiary held concurrent ownership with the trustee.17 A refinement of the same view saw the beneficiary as the “true” owner, with the trustee’s formal title being no more than a right of administration.18 That approaches the bewind. Sometimes there was unabashed confusion. For example on the first page of Mackenzie Stewart’s The Law of Trusts, the standard work on the subject in the mid-twentieth century, it is said that “beneficial ownership … belongs to the beneficiary … who has merely a right to vindicate his interest by an action in personam against the trustee”. It is easy to have fun with this account. The beneficiary has “ownership”. Hence he can use a rei vindicatio (“vindicate”). Nonetheless his right is merely “in personam”. The established modern view is that the beneficiary does not own the trust property, but has only a personal right against the trustee.19 Hence in a trust the only real right is the right of ownership held by the trustee, and ownership is indivisible. Other mixed legal systems have adopted the same view.20 This leaves the problem of insolvency. If the right of the beneficiary is personal only, why does it prevail against the creditors of the trustee? The 15 James Dalrymple, Viscount Stair, The Institutions of the Law of Scotland, 2nd edn (1693) 1.13.7. 16 W A Wilson and A G M Duncan, Trusts, Trustees and Executors, 2nd edn (1995) ch 1. 17 E.g. Govan New Bowling-Green Club v Geddes (1898) 25 R 485 at 492 per Lord McLaren. 18 E.g. Heritable Reversionary Co Ltd v Millar (1892) 19 R (HL) 43 at 46 per Lord Watson. 19 Inland Revenue v Clark’s Trs 1939 SC 11 at 22 per Lord President Normand; Sharp v Thomson 1995 SC 455 at 475 per Lord President Hope. 20 It is interesting to note in South Africa uncertainties similar to those seen in Scotland: see E Cameron, M J de Waal, E Kahn, P Solomon and B Wunsh, Honoré’s South African Law of Trusts, 5th edn (2002) 579.



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standard answer is that the beneficiary’s right is no ordinary personal right. Rather it is an “in-between” right, not real, of course, but better than the usual personal right.21 This analysis is developed, in the context of South African law, by Tony Honoré in an important passage which deserves to be quoted in full:22 [S]o long as the trustee retains the legal ownership of the trust property the beneficiary is to some extent protected because in principle trust property forms no part of the trustee’s personal estate. The beneficiary does not therefore have to compete with the trustee’s private creditors for the trust assets owned by the trustee but only with trust creditors. This protection does not make the beneficiary’s right in rem, as is sometimes supposed, but the right in personam is safeguarded and rendered more valuable by the separation of trust assets from private assets. The beneficiary may be said to have a protected right in personam.

More important, however, than the idea of “a protected right in personam” is Honoré’s insistence on a separation of assets and liabilities. The first of these separations, of course, is an accepted feature even of the common law trust. Indeed the very first of the qualities required of a trust under article 2 of the Hague Trusts Convention is that “the assets constitute a separate fund and are not a part of the trustee’s own estate”.23 But a civil lawyer, at least, must go further. The reason why some creditors can claim against the trust fund and some cannot is that there is a separation, not merely of assets, but of liabilities as well. In Scotland, as in South Africa, modern scholarship has tended to focus on this separation of assets and liabilities. More than that, in the analysis now favoured in Scotland, the separation of assets and liabilities – or of “patrimonies” – is seen as the central idea of the whole law of trusts.24 For with patrimony it is possible to explain, not merely the beneficiary’s preference on insolvency, but a great deal else besides.

21 See e.g. Joint Administrators of Rangers Football Club plc, Noters [2012] CSOH 55, 2012 SLT 599 at para 31 per Lord Hodge: “The right of a trust beneficiary in the estate of a trust, although a personal right, prevails over the unsecured creditors of the trustee in the latter’s insolvency … As insolvency is the acid test of property rights, the beneficiary’s right is in that sense proprietary.” 22 Cameron et al, Honoré’s South African Law of Trusts (n 20) 559. 23 See also art 11 (“the trust property constitutes a separate fund”). 24 Apart from G L Gretton, “Trusts without equity”, Ch 5 above, see also G L Gretton,“Trust and patrimony”, in H L MacQueen (ed), Scots Law into the Twenty-First Century: Essays in Honour of W A Wilson (1996) 182; K G C Reid, “Trusts in Scotland”, in Hayton et al (eds), Principles (n 9) 67; G L Gretton and A J M Steven, Property, Trusts and Succession, 2nd edn (2013) ch 22.

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D. TWO PATRIMONIES The idea of patrimony is not a new idea but a very old one, traceable back to Roman law and a familiar presence in the civil law tradition.25 That it might usefully be applied to trusts is, however, an idea of the 1930s and of the French jurist, Pierre Lepaulle.26 A patrimony – or “estate” to use a term which is often more familiar – is the totality of a person’s assets and, in an extended sense, of the person’s liabilities as well. Ordinarily, a person has only a single patrimony, but there can also sometimes be special patrimonies, in which case a person holds both his own general or private patrimony and at the same time a special patrimony dedicated to some specific purpose. Lepaulle’s insight was that, although patrimony was unknown to the common law, the trust could nonetheless be explained as a special patrimony, as a patrimoine d’affectation. As an explanation of the common law trust, Lepaulle’s views have been found wanting,27 for reasons which need not detain us here, but they have influenced the development of trusts in civil law jurisdictions in Latin America28 and also in Quebec where, according to the Civil Code (1991), the trust patrimony is an ownerless patrimoine d’affectation.29 More recently, the idea of patrimony has been taken up again and further developed by a number of trusts scholars.30 In its newly elaborated form the theory of special patrimony offers, perhaps for the first time, a thoroughly convincing explanation for creditor immunity and for certain other features of the trust. On this analysis, a trustee has two patrimonies – a private patrimony and a trust patrimony. Distinct in law, the patrimonies should also be kept distinct in practice by proper labelling and accounting. The assets of one patrimony cannot normally be transferred to the other,31 and if an asset is sold from

25 Gretton, “Trusts without equity” (n 24) at 103; R G Anderson, “Words and concepts: trust and patrimony”, in A Burrows, D Johnston and R Zimmermann (eds), Judge and Jurist: Essays in Memory of Lord Rodger of Earlsferry (2013) 347. 26 P Lepaulle, Traité théorique et pratique des trusts en droit interne, en droit fiscale international (1932). Ch 2 above provides an English translation of the first chapter of Lepaulle’s Traité. 27 See Chs 3 and 4 above. 28 Malumian, Trusts in Latin America (n 4) 20-22; R Molina Pasquel, “The Mexican fideicomiso: the reception, evolution and present status of the common law trust in a civil law country” (1969) 8 Colum J Transnat L 54 at 62-67. 29 Civil Code of Québec art 1261. For an in-depth analysis of the Quebec trust see Ch 9 below. 30 As well as the other chapters in this book, and the writings referred to in n 24, see some of the contributions to L Smith (ed), The Worlds of the Trust (2013). 31 Unless, of course, the trustee is also a beneficiary of the trust.



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one patrimony, the proceeds of the sale are paid into the same patrimony, each patrimony thus operating its own real subrogation. Much the same is true of liabilities. A trustee may incur liabilities either in a private capacity or in the capacity as trustee, and a creditor is thus either a private creditor or a trust creditor. The difference is crucial. Leaving aside the case where a creditor has a right in security over a particular asset,32 a creditor is, in principle, restricted to a single patrimony. A private creditor must claim from the private patrimony and a trust creditor from the trust patrimony. If that patrimony is empty, the creditor must go without, for the other patrimony is not available. In this principle lies the most convincing explanation of a beneficiary’s protection against insolvency. The reason why a beneficiary prevails against the private creditors of the trustee is, quite simply, that each has a claim in respect of a different patrimony. But the rule is even-handed, and could be re-expressed as being that private creditors prevail against the beneficiary. For the fact that the private creditors have no claim against the trust patrimony is balanced by the fact that the beneficiaries have no claim against the private patrimony. One claim is not better than the other; they are merely different. Of course, the economic realities are otherwise. Since trusts do not normally trade, the trust patrimony will rarely become insolvent. Only the private patrimony tends to be at risk and, if insolvency strikes, the trust ­beneficiaries are protected. It is this practical protection which is being hinted at in Honoré’s “protected right in personam”. The expression, however, tends to mislead. As a matter of legal doctrine, the position of the beneficiary is actually inferior to the position of an ordinary creditor. Both have personal rights, it is true, but the personal right of the beneficiary is postponed to the personal rights of all other creditors in the trust patrimony. If trust debts are incurred which exceed the value of the estate, the beneficiaries will get nothing. But this is so unusual in practice as to go almost unnoticed. In one sense the division of patrimonies is imperfect, for occasionally a claim is allowed against the “wrong” patrimony. But this is always a claim by a creditor of the trust, for it is a cardinal rule that a private creditor is never able to take from the trust patrimony. In Scotland there are two cases. One is the rule that a creditor of the trust can take from the private patrimony 32 In theory a personal creditor could be given a right in security over a trust asset, because the trustee owns both trust and personal assets. But such a security would be challengeable as in breach of trust.

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unless the trustee contracted in his capacity as such. A trustee, in other words, may have personal liability for trust debts.33 The other is the rule that damages for breach of trust can be recovered (by the beneficiary) from the private patrimony of the trustee. E. DETACHED PATRIMONIES In a trust, the attachment of patrimony to person is provisional and likely to change. Suppose, for example, that a trust is set up in which Andrew is sole trustee. In that case Andrew has both a private patrimony and the trust patrimony. But if Andrew assumes Betty as a new trustee (as he is usually entitled to do), there are now two trustees and the patrimony is shared by both. If Colin is further assumed as a trustee, the patrimony is shared three ways. Betty, of course, might already be a trustee in, say, two other trusts, in which case she has her private patrimony as well as a share ­ atrimonies. Suppose Andrew decides it is time to resign as in three trust p trustee. Resignation terminates ownership, without the need for any transfer process,34 and the patrimony is then held by the remaining trustees (Betty and Colin). In Scotland this rule has been incorporated into statute:35 Where a trustee entitled to resign his office shall have resigned … such trustee shall be thereby divested of the whole property and estate of the trust, which shall accrue to or devolve upon the continuing trustees or trustee without the necessity of any conveyancing or other transfer by the resigning trustee.

What happens if all the trustees die or resign? There is then a patrimony but no person. This does not bring the trust to an end. A trust patrimony has a life of its own, which does not depend on the accident of the existence – or non-existence – of trustees. A trust without trustees is like a ship in which all the crew have perished. There is no one to sail the ship. But the ship still 33 Scottish Law Commission, Report on Trust Law (Scot Law Com No 239, 2014; available at www. scotlawcom.gov.uk) paras 13.1-13.29; cf R G Anderson, “Contractual liability of trustees” 2003 JR 45. The historical foundations of this rule are surveyed in K G C Reid, “Embalmed in Rettie: the City of Glasgow Bank and the liability of trustees”, in Burrows et al (eds), Judge and Jurist (n 25) 489. For an example of a statute restricting claims to the trust patrimony, see Building (Scotland) Act 2003 s 44(2). In its Report the Scottish Law Commission recommended a further restriction of personal liability by confining claims to the trust patrimony if the creditor was “aware (whether or not by virtue of having been so informed by the trustees) that they are entering into the contract in their capacity as trustees”: see s 33(1) of the draft Bill included at the end of the Report. 34 Except in a case where the resigning trustee was the sole trustee. In Scotland a sole trustee cannot resign without first assuming a new trustee: see Trusts (Scotland) Act 1921 s 3(1). 35 Trusts (Scotland) Act 1921 s 20.



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remains a ship, and, if a new crew is found, it can take to the seas once more. So with trusts. If the trustees have died, the court will appoint new ones. The integrity of the patrimony is unaffected. F. PERSONS, THINGS, OBLIGATIONS A question which is sometimes asked is, how ought trusts to be classified? From what has just been said, it would be difficult to classify trusts as part of the law of obligations. Obligations require the existence of persons to hold rights and to be subject to them. But a trust can survive without any persons at all. In our example, there were no trustees; and it is possible to imagine a trust in which there were no persons at all – no trustees, no surviving settlor, and no ascertained beneficiaries. Yet it would remain a trust. This is not to deny the important role played by obligations. Most trusts have persons most of the time, and these persons are bound together by rights and obligations. Later I discuss their nature. But they are not at the centre of the trust; the trust can exist without them. A more traditional classification is to say that trusts are part of the law of property. This is reflected, for example, in the Civil Code of Québec, or in the definition in the Scotland Act 1998 of “private law” for the purposes of the Scottish Parliament as comprising persons, obligations, property and actions, “property” being expressly declared to include trusts.36 There is much to be said for this approach. But there is also something to be said for acknowledging an affinity with the law of persons. Trusts are not normally juristic persons, of course,37 although the Scottish Law Commission did consider whether they ought to be before rejecting the idea.38 But in many respects trusts behave like persons. As we have seen, a trust has an existence which is independent of (other) persons. And those who administer a trust are mere holders of an office. They resemble the directors of a corporation and, like directors, incur obligations, not in a private capacity, but in the capacity of an office-holder. If they lose the office, they lose the obligations. And like a director, trustees are subject to the regulation of the court, which has power to dismiss them, and to appoint others in their place.39 36 Scotland Act 1998 s 126(4). 37 But that is not true absolutely everywhere: see e.g. art 109 of the Commercial Code of Ecuador, discussed in Malumian, Trusts in Latin America (n 4) 196. 38 Scottish Law Commission, Discussion Paper on the Nature and Constitution of Trusts (Scot Law Com DP No 133, 2006) paras 2.29-2.46. 39 Trusts (Scotland) Act 1921 ss 22 and 23.

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There are other parallels with juristic persons. Sometimes separation of patrimony comes close to separation of personality. For example, a trust has its own tax regime, the trust patrimony being taxed separately from the private patrimony of the trustees. Or again if a sole trustee wishes to make a transfer from the trust patrimony to his private patrimony, the practice – in Scotland at least – is for the trustee to grant a formal conveyance from himself as trustee in favour of himself as a private individual. While it is not clear that this is strictly necessary,40 it is certainly instructive. A major difference, of course, is a practical one. Corporations require to be registered; annual accounts must be lodged along with much other information; and anyone can inspect the register and find out the state of the balance sheet, or the names of the directors. Trusts, in Scotland at least, are unregistered. A common complaint of UK company law is that a level of formality and publicity designed for the largest and richest companies is applied, without sufficient modification, to even the smallest and most modest company.41 With trusts it is the other way around. The informality of trust law belongs to a world in which trusts were small and short-lived. Today trusts may be neither. But, except for charitable trusts,42 the informality largely remains. Informality is accompanied by secrecy. A trust is established simply by declaring it to be so.43 There is no need to go to a notary.44 In the normal case there is no need even to use writing.45 An oral trust is perfectly valid. This has obvious advantages to the settlor, but also obvious disadvantages to outsiders. If I lend money to someone, I cannot be sure that the property standing in her name in the Land Register is not subject to a trust.46 And 40 For example, it is not done where a person declares himself trustee over some of his own assets. Here the trust is regarded as established by a declaration of trust alone, without the need for a conveyance: see Allan’s Trustees v Lord Advocate 1971 SC (HL) 45. 41 Reporting requirements are, however, reduced to some extent for “small companies” and “micro-entities”: see Companies Act 2006 ss 381 ff. 42 For which there is now a quite extensive disclosure regime, set out in the Charities and Trustee Investment (Scotland) Act 2005. For example, charitable trusts require to be registered in the Scottish Charity Register, and to keep annual accounts, making them available on request. 43 Arguably the trust is constituted even without a transfer of ownership, although the position cannot be said to be settled. See Scottish Law Commission, Discussion Paper on the Nature and Constitution of Trusts (n 38) part 3, and Report on Trusts (n 33) para 3.6. Of course, in practice there is usually an immediate transfer except where settlor and trustee are the same person. 44 In Scotland, as in England, notaries are not generally used to authenticate juridical acts. 45 Except where the settlor is also sole trustee: see Requirements of Writing (Scotland) Act 1995 s 1(2)(a)(iii). 46 In practice the fact that a person holds as a trustee is often disclosed on the Register. But it was decided in Heritable Reversionary Co Ltd v Millar (1892) 19 R (HL) 43 that there was no requirement of disclosure.



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even if there was no trust at the time when I lent the money, a trust may have come into existence by the time that I want to collect it. For a person can make herself trustee of her own property at any time – subject, of course, to the actio Pauliana. If the trust is properly constituted, my claim is restricted to the private patrimony and, depending on its solvency, my prospects of recovery may be impaired. As it happens, most settlors do more than the law requires. In Scotland trusts are invariably in writing, and the declaration of trust is usually registered in a public register47 (although not in a property register). A transfer of ownership, itself a public act, accompanies or follows the declaration. Trusts have the potential to mislead, even to defraud. In Scotland, however, that has always been rare. G. TRUSTEES AND BENEFICIARIES In the analysis offered in this chapter, patrimony, and not the trusteebeneficiary relationship, is seen as the central feature of the trust. That does not mean that trustees and beneficiaries are unimportant. But the manner in which their rights are conceptualised seems a secondary matter, important chiefly in relation to third parties. This is a long way from the quotation with which this chapter began. (1) Trustees Take first the case of trustees. In all jurisdictions which recognise the trust, the role assigned to trustees is the same: they are to administer the trust property and have a right of disposal. Hence, however their position is conceptualised, trustees must be given full management rights. If trustees own the trust property, nothing further need be done: powers of management follow as a matter of course. But if either the settlor or the beneficiary is owner, not only will management powers have to be conferred on the trustee, they will have to be taken away from the person who is owner. In that case ownership is stripped not only of benefit – usually unavoidable in a trust – but of management rights as well. Furthermore, a trustee who derives powers indirectly, from the ownership of others, will have the tiresome burden of proving these powers to the satisfaction of third parties. Even if there is no doctrinal reason for making the trustee the owner, therefore, there are powerful reasons of convenience. And there are other reasons 47 Kept by the Court of Session (the Books of Council and Session) or by the local sheriff court (Sheriff Court Books).

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too which argue against placing title in either the settlor or the beneficiary. There might be no current beneficiaries or too many. There might be a dispute as to whether a person is a beneficiary or not. The settlor or beneficiary might die or be dissolved. In short, there might be no one who can be owner. And unlike the position for trustees, it is hard to see how new settlors or beneficiaries might come to be appointed. It is hardly a matter for surprise, therefore, that the solution adopted almost everywhere is to make the trustee the owner.48 That is certainly true in both Scotland and England.49 But there are checks, as there must be: in England, the “legal” ownership of the trustee is counterbalanced by the “equitable” ownership of the beneficiaries; in Scotland dominium is restrained by obligation in the form of the rules of the trust. Quebec alone has a different solution. On the one hand, Quebec is unwilling to recognise the duplex dominium of English law. But on the other hand it hesitates to give the name of ownership to a right so attenuated as the right of a trustee. Thus the Civil Code confers a right of administration but no right of ownership. The trust patrimony itself is, quite simply, unowned.50 This is a novel, even a startling solution. But for present purposes I would merely observe that a separate patrimony which has no owner comes perilously close to a juristic person.51 (2) Beneficiaries There are two main models for beneficiaries. The first allows them a personal right against the trustee, exigible out of the trust patrimony. This is the solution in mixed legal systems and, it seems, in civil law systems too. The other model – favoured in England and other common law jurisdictions – is to give beneficiaries some kind of right in rem, but one which falls short of a real right in the civilian sense. This, of course, is the right often characterised as beneficial or equitable ownership.52 48 A rare exception is the bewind trust in South Africa (deriving from the Dutch institution of bewind) which gives ownership to the beneficiary, and the trust in China where ownership may be left with the settlor. 49 See n 15 above. Of course, if a trust is constituted by declaration alone and without the need for transfer (as, arguably, in Scotland), then for a short initial period ownership is located in the settlor. 50 Civil Code of Québec art 1261. 51 See most recently G L Gretton, “Up there in the Begriffshimmel?”, in Smith (ed), Worlds of the Trust (n 30) 524. 52 The nature of equitable rights has been the subject of revisionist scholarship: see e.g. B McFarlane and R Stevens, “The nature of equitable property” (2010) 4 J of Equity 1.



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The choice is less important than it might seem. It has little or no impact on the internal workings of the trust, for in either model the trustee must administer the trust property for the benefit of the beneficiaries, or face a (personal) action for breach of trust. The importance relates almost entirely to cases where (1) trust property is transferred to some third party in breach of trust and (2) the third party becomes insolvent. It need hardly be said that this combination of facts is unusual. Disposal in breach of trust is not usually a problem in itself. If the disposal is a sale, then the proceeds will form part of the trust patrimony on principles already mentioned. If it is a donation – or if the sale proceeds have disappeared (usually with the trustee) – some basis can usually be found to set the transfer aside, such as unjustified enrichment, or fraud. Only if the acquirer gave value and was in good faith is he likely to be entitled to keep the property. So far there is little or no difference between the two models.53 But if the acquirer is insolvent the position is different. The right in rem conferred by English law entitles the beneficiary to a preference, of a rather complicated kind, in the acquirer’s insolvency. By contrast, a pure personal right confers no priority. H. CONCLUSION: PATRIMONY NOT EQUITY Scotland has a trust without equity. So too do the other mixed legal systems, as well as those increasing numbers of civil law systems which have chosen to adopt the trust. But in the absence of equity another organising principle must be found. The argument of this chapter is that that principle is patrimony. In Scotland, the central role of patrimony has been accepted by legal scholars, by the Scottish Law Commission,54 and, increasingly, by the courts,55 53 There are, of course, some differences of detail, such as the meaning of good faith, and the role played by constructive notice. In Scotland, even a bad faith purchaser will usually receive an unchallengeable title: see Trusts (Scotland) Act 1961 s 2. 54 Scottish Law Commission, Discussion Paper on Nature and Constitution of Trusts (n 38) paras 2.16-2.28. The suggestion was even made that the dual patrimony theory be put on a statutory basis (paras 2.26-2.28), although in its subsequent Report on Trusts (n 33) para 3.4 the Scottish Law Commission concluded that the theory was too well established for this to be necessary. 55 The first steps, indeed, have already been taken: see Royal Insurance (UK) Ltd v AMEC Construction Scotland Ltd [2007] CSOH 179, 2008 SC 201 at para 12(b) per Lord Emslie (summarising an argument of counsel); Ted Jacob Engineering Group Inc v Matthew [2014] CSIH 18; 2014 SC 579 at para 90 per Lord Drummond Young (referring to “interesting academic articles” by Professors Gretton and Reid); Glasgow City Council v The Board of Managers of Springboig St John’s School [2014] CSOH 76 at paras 16-20 per Lord Malcolm (noting that “the notion of a trustee’s dual patrimony is helpful in understanding many of the implications and consequences of our law of trusts”).

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and can now be regarded as “clearly established”.56 In Latin America too, patrimony is widely used as an explanation of trusts,57 and the actual term appears in some legislative statements of trusts law.58 Partly under Scottish influence,59 the concept has also been used in various soft-law projects on European private law.60 Even as early as the Principles of European Trust Law, prepared in 1999 by an international group of scholars led by the Radboud University in Nijmegen, patrimony was already a shadowy presence although the emphasis was mainly and conventionally on the separation of assets.61 By 2009, when an unofficial draft EU Directive on Protected Funds (i.e. trusts in a commercial context) was produced by a successor group, patrimony had become the central organising principle.62 Article 3.2 of the Draft Directive provides that: The assets of a protected fund form a patrimony separate from the private patrimony of the person who is administrator63 and from the patrimony of any other protected fund held by that person.

“Accordingly”, article 3.3 continues: a creditor has no claim against – (a)  the patrimony of a protected fund in respect of a private debt of its administrator; (b) the private patrimony of the administrator in respect of a debt of a protected fund.

56 Scottish Law Commission, Report on Trusts (n 33) para 3.4. The Commission adds: “It is also of importance that no other plausible theory has been advanced to explain the nature of a Scottish trust. In these circumstances we are firmly of the view that the dual patrimony theory represents the true nature of a trust in Scots law”. 57 Malumian, Trusts in Latin America (n 4) 19-23. Here the influence of Lepaulle, mentioned earlier at D above, is apparent. 58 For example, in the legislation introducing the trust to Uruguay in 2003 (Ley Nº 17.703), art 6 provides succinctly that “Los bienes y derechos fideicomitidos constituyen un patrimonio de afectación, separado e independiente de los patrimonios del fideicomitente, del fiduciario y del beneficiario” (“The things and rights held in trust constitute a patrimony by affectation, separated and independent from the patrimonies of the settlor, the trustee and the beneficiary”; editor’s translation). Other examples can be found in the Commercial Codes of Bolivia (art 1410), Colombia (art 1233), and Costa Rica (art 634): see Malumian, Trusts in Latin America (n 4) 130, 171 and 182. It would be a fruitful study to compare the role played by patrimony in Latin America and in Europe, particularly as there seems to have been little in the way of mutual influence. 59 Reflected in the membership of the groups. 60 For discussion and evaluation, see A Braun, “The framing of a European law of trusts”, in Smith (ed), Worlds of the Trust (n 30) 277. 61 Hayton et al (eds), Principles (n 9) arts I(1), (3) and III(3). 62 Kortmann et al (eds), Towards an EU Directive (n 7). 63 I.e. trustee.



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The publication of the Draft Common Frame of Reference was so close to that of the draft Directive that it is improbable that there was mutual influence.64 Yet its treatment of trusts is also based on the idea of dual patrimony, in language which is often similar to that of the draft Directive.65 Thus the trust fund is said to be “a patrimony distinct from the personal patrimony of the trustee and any other patrimonies vested in or managed by the trustee”, from which it follows that “the personal creditors of the trustee may not have recourse to the trust fund, whether by execution or by means of insolvency proceedings”.66 With the concept of patrimony prominent in both academic discourse and in pan-European initiatives, it was bound to have an impact on those civil law countries which have, or would like to have, the trust.67 Latin America has long led the way in this respect, as already mentioned; and in countries as different as France,68 Luxembourg,69 Italy,70 the Netherlands,71 Romania,72 Japan,73 and China74 it is apparent that others are now ­following or are likely 64 C von Bar and E Clive (eds), Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (“DCFR”) (6 vols, 2009). In relation to trusts, the commentary material (vol 6, 5669-5742) is largely incomplete but is expected to be issued in due course as a separate volume. 65 For an assessment of Book X (trusts) of the DCFR, see the papers by Alexandra Braun, Ben McFarlane, Kenneth Reid, Stephen Swann and Sjef van Erp published in (2011) 15 EdinLR 462, as well as A Braun, “Trusts in the Draft Common Frame of Reference: the best solution for Europe” (2011) 70 CLJ 327. 66 DCFR, X.-1:202. For commentary including an example, see von Bar & Clive, DCFR (n 64) vol 6, 5686-5688. Trust creditors have a right of direct recourse to the trust fund: see X.-10:202. 67 H Watanabe, “Trusts without equity and prospects for the introduction of trusts into European civil law systems”, available at http://win-cls.sakura.ne.jp/pdf/23/20.pdf. 68 French Civil Code art 2011 (added in 2007) (“les tenant séparés de leur patrimoine propre”, “held [by trustees] separately from their personal patrimony”; editor’s translation). For discussion, see the works cited in n 7 above. An obstacle for France and other countries in the French tradition has been the dominance of the view, associated with Aubry and Rau, that a person can only have a single patrimony. 69 A Prüm, “National report for Luxembourg”, in Kortmann et al (eds), Towards an EU Directive (n 7) 239, 249. 70 J Koessler, “Is there room for the trust in a civil law system? The French and Italian perspective”, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2132074. 71 As well as Ch 10 below, see S C J J Kortmann and H L E Verhagen, “National report for the Netherlands”, in Hayton et al (eds), Principles (n 9) 195, 205-207. 72 Romanian Civil Code (2011) art 773 (in a fiducia the rights “constitute an autonomous patrimony, separate from the other rights and obligations in the fiduciary’s own patrimony”). For discussion, see e.g. L Tuleas¸ca˘, “The concept of the trust in Romanian law” (2011) 6 Romanian Economic and Business Review 150, 155-158. 73 Issue 2 of the Quarterly Review of Corporation Law and Society for 2011 was devoted to the topic “Trusts without equity”. 74 K G C Reid, “Conceptualizing the Chinese trust: some thoughts from Europe”, in L Chen and C H van Rhee (eds), Towards a Chinese Civil Code: Comparative and Historical Perspectives

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to do so.75 The change is truly remarkable. Even fifteen years ago, when this paper was first published, the concept of patrimony languished on the margins of trust law scholarship and practice; today it is everywhere in the civil law world, its rise apparently unstoppable.

(2012) 209; L Ho, “Trust laws in China: history, ambiguity and beneficiary’s rights”, in Smith (ed), Re-imagining the Trust (n 7) 183, 212-214. 75 Needless to say, this list is not intended to be exhaustive.

7  Scottish Trusts in the Common Law* Lionel D Smith**

A. INTRODUCTION B. SCOTTISH TRUSTS … C. … IN THE COMMON LAW (1) Trusts and estates (2) The position of estate beneficiaries (3) Historical foundations D. TRUSTEES AND PERSONAL REPRESENTATIVES IN THE COMMON LAW E. EVEN MORE SCOTTISH TRUSTS IN THE COMMON LAW (1) The way of the future? (2) Effects on beneficiaries (3) Effects on non-contractual creditors (4) Conceptual difficulties F. CONCLUSION

127 128 133 133 138 141 145 148 148 152 153 155 159

A. INTRODUCTION It is a great pleasure to be here this evening, to give this twelfth annual W A Wilson Memorial Lecture. More than that, it is a genuine honour to be here, at this great law faculty in this great city, to give a lecture in memory * This article was originally published in (2013) 17 EdinLR 283. ** James McGill Professor and Director, Paul-André Crépeau Centre for Private and Comparative Law, Faculty of Law, McGill University. [Editor’s note: Lionel D Smith is currently Sir William C Macdonald Professor of Law, Faculty of Law, McGill University; Researcher, Paul-André Crépeau Centre for Private and Comparative Law; Professor of Private Law, Dickson Poon School of Law, King’s College London.] This is a revised and annotated version of the 2010 W A Wilson Memorial Lecture, given at the School of Law, University of Edinburgh, 7 December 2010. I am grateful to Professor Kenneth Reid for the honour of the invitation and the pleasure of the visit. I am also grateful for their helpful comments to Mr Michael McAuley and to Professor George Gretton.

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of a great jurist and a great teacher. Unlike many of you, I did not know Bill Wilson. But I have gleaned a sense of the breadth of his scholarly interests, and I think also of his character, from having read his published work, and in particular from having read the book of essays created in his memory in 1996.1 He is known, of course, for many contributions in many fields during a long career. One of his interests was the law of trusts, and the Scots law of trusts will be a starting point for my lecture this evening.2 After tracing some recent developments in our understanding of the juridical nature of the trust in Scots law, my goal will be to show how the Scottish trust is – and, how it is not – found in the common law. First, how it is not: the trust of the common law tradition cannot be understood according to the principles that underlie the trust of Scotland. But then, how it is: the common law does have an institution that corresponds almost exactly to the Scottish trust. This institution is the estate of a deceased person. Common lawyers know that their estate is different from their trust, although I will suggest that they are not entirely certain how or why it is different. I will argue that the Scottish trust sheds light on this puzzle, and, along with a dose of legal history, helps us to understand the ubiquitous presence of Scottish trusts in the common law. I will go on to discuss some recent developments in trusts in the common law world, which show that there may be more Scottish trusts in the common law, and that there may be still more before very long. Finally, I will conclude by asking whether the common law tradition has or has not reason to be concerned by these developments. B. SCOTTISH TRUSTS … Let me begin, then, with a few words about the Scottish trust, on which Bill Wilson was such an authority, and on which some members of this audience are also authorities, and on which I hasten to say that I am no kind of authority at all. It is a commonplace – although, as I will presently suggest, one that is fundamentally mistaken – that the trust of the common law tradition is based on a division of ownership as between the trustee and the beneficiary. This suggests that it must be impossible of acceptance in legal systems with a civilian law of property, in which ownership cannot be divided into administrative and beneficial components, any more than the game of football could   1 H L MacQueen (ed), Scots Law into the Twenty-First Century: Essays in Honour of W A Wilson (1996).   2 Among his many contributions to Scots law is W A Wilson and A G M Duncan, Trusts, Trustees and Executors, 2nd edn (1995).



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be divided up into running football and passing football.3 But many legal systems with a civilian law of property do have a law of trusts, and some of these, such as Scots law, have had a law of trusts for a long time. The question becomes, how is the trust structure to be analysed so as to be faithful to the general law of which it forms a fundamental and indissociable part? In the last fifteen years or so, a great deal of profound and innovative scholarship has been devoted to this question here in Scotland.4 With the caution that is rightly observed by an outsider, I venture to say that a ­consensus appears to be emerging that the best way to understand the Scottish trust is as a patrimony, belonging to the trustee, but existing apart from the trustee’s personal patrimony. The trustee’s personal creditors have access to his personal assets, but not to the trust assets, lying as they do in another patrimony. The trust creditors, conversely, have access to the trust assets, but not to the personal assets of the trustee.5 This approach ensures that the rights of trust beneficiaries are protected from the claims of the trustee’s own creditors; the two groups claim against entirely different sets of assets, and, outside of the case of a breach of trust at least, will never be in competition with one another. But it does this while respecting the logic of civilian o­ wnership. Ownership of the trust property is in the trustee: full, civilian, undivided ownership. The beneficiary, for his part, has rights of course, as set out in the instrument by which the trust is created; but these are not real rights, or proprietary rights as a common lawyer might say, in the nature of a kind of ownership of the trust property. They are only personal claims on the trust patrimony. This illuminating analysis has emerged according to the best scholarly traditions of both the common law and the civil law: by the application of  3 F Weiser, Trusts on the Continent of Europe: A Study in Comparative Law (1936) 4-8. Some commentators suggest that the difficulty lies in the numerus clausus principle, but this would not present a difficulty for the legislative introduction of a trust.   4 Some elements of this development are: G L Gretton,“Trust and patrimony”, in MacQueen (ed), Scots Law into the Twenty-First Century (n 1) 182; K G C Reid, “Trusts in Scotland”, in D J Hayton, S C J J Kortmann, and H L E Verhagen (eds), Principles of European Trust Law (1999) 67; G L Gretton, “Trusts without equity”, Ch 5 above; K G C Reid, “Patrimony not equity: the trust in Scotland”, Ch 6 above. Most recently there has been a substantial project on trusts at the Scottish Law Commission, which over the past few years has published one report (Report on Variation and Termination of Trusts (Scot Law Com No 206, 2007)), and two consultation papers and eight discussion papers on a range of topics, including a Discussion Paper on The Nature and Constitution of Trusts (Scot Law Com DP No 133, 2006).   5 In this sentence, and throughout this paper, I use the phrases “personal creditor” and “trust creditor” without intending to imply that a trust can be a debtor. A trust creditor is one whose claim arises out of the exercise, by the trustee, of the powers he holds as such. A personal creditor is one whose claim arises otherwise: either out of some interaction with the trustee that has nothing to do with the trust, or, out of a breach of trust. In both the Scots law trust and the common law trust, the debtor in every case is the trustee.

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creative analysis that always remains in contact with the underlying general principles. There are other possible structures, of course, that can be used to apprehend a trust within a civilian law of property. In Quebec, the trust is a patrimony by appropriation. The legislative goal appears to have been to implement the vision of Pierre Lepaulle, that it was possible for rights to be appropriated to a purpose with the result that they were not held by any legal subject.6 If Scots law breaks the basic rule that every person has only one patrimony, Quebec law seems to break the rule that every patrimony is attached to a person.7 But if the trust is to be a fundamental legal category – that is, something that cannot be explained in terms of other legal notions, such as contract or legal personality – then you have to break a rule or two.8 You can’t make an omelette without breaking eggs. Let us say a little bit about the common law trust. It is not a patrimony in the civilian sense. Let me say why it is not one, and then more interestingly perhaps, why it cannot be one.9 A patrimony in the strict sense is a collection of assets and liabilities, in which the assets answer to the liabilities. The common law trust is not a patrimony because only rights, and never obligations, are held in trust in the common law trust. How are trust obligations conceptualised? In the common law trust, the trustee is always personally liable for obligations incurred in the course of administration of the trust.10   6 A Popovici, “La fiducie québécoise, re-belle infidèle”, in A Popovici, L Smith and R Tremblay (eds), Les intraduisibles en droit civil (2014) 129. M Lupoi, Trusts: A Comparative Study, trans S Dix (2000), notes a similar institution in Ethiopian law (at 276 and 307-308) and possibly Ecuadorean law (at 275-276, but see also 306 n 229). See also the Code civil of Mauritius, arts 1100-1 to 1100-6 (added in 2001), and the trust provisions of the new Czech Civil Code that came into force on 1 January 2014 (for which reference I thank Tomáš Richter), discussed in draft form in T Richter, “National report for the Czech Republic”, in S C J J Kortmann, D J Hayton, N E D Faber, K G C Reid and J W A Biemans (eds), Towards an EU Directive on Protected Funds (2009) 59 [Editor’s note: the reference to the date of coming into force was amended by the editor].   7 It is the Scots approach that appears to be having the most influence, as similar analyses have been deployed to understand the trust of the People’s Republic of China and also the fiducie created in France in 2000. See the papers in L Smith (ed), Re-imagining the Trust: Trusts in Civil Law (2012), and note that a similar approach is taken in the law of South Africa: E Cameron M J de Waal, E Kahn, P Solomon and B Wunsh, Honoré’s South African Law of Trusts, 5th edn (2002) 70-72; Raath v Nel (473/2011) [2012] ZASCA 86.   8 The rules, in the context of the civilian patrimony, come from the classic theory of C Aubry and C-F Rau. For an English translation, with a brilliant comparative commentary, see N Kasirer, “Translating part of France’s legal heritage: Aubry and Rau on the Patrimoine”, Ch 8 below.   9 The full argument is in L Smith, “Trust and patrimony”, Ch 3 above. It was only in preparing the current lecture that I realised that I had inadvertently copied the title of one of George Gretton’s papers (n 4 above). He was too much of a gentleman to mention it. 10 This sentence states the orthodox law. In section E, I will address the extent to which the law has recently changed, or could change.



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He has the right to reimburse himself out of the trust property, of course, although he may lose this right by committing a breach of trust.11 This is because if, due to such a breach, he incurs liabilities which oblige him to replenish the property held in trust, then these liabilities will deprive him, by a kind of set-off, of the ability to reimburse himself for expenses he has incurred. The result is that trust creditors may suffer in an insolvency of the trustee, even if there are trust assets, because creditors have only indirect access to the trust assets, by way of the trustee’s, potentially fragile, right of reimbursement. Let me explain with an example. The trustee lawfully contracts with a creditor for improvements to land held in trust. The trustee owes £100 to the creditor. The trustee may lawfully use trust assets to pay the debt, or pay it with his own money and reimburse himself from trust assets. If the creditor is required to execute on a judgment against the trustee, however, he can only execute against the non-trust assets held by the trustee; no creditor of the trustee, not even a trust creditor, can levy execution against assets held in trust.12 If the trustee’s personal assets are sufficient, all is well. The difficult case is where they are not sufficient. The creditor may have indirect access to the trust assets in this way: even if the trustee is personally insolvent, he still holds a right to reimbursement out of the trust assets, and the creditor can benefit from this right of the trustee by a process that is sometimes called equitable execution.13 But now assume that the trustee has committed a totally unrelated breach of trust, causing a loss of £200 to the value of the trust property, and making himself liable to restore that loss. In this new case, the creditor suffers because his only access to the trust assets is through the trustee’s right of reimbursement. The trustee, on these new facts, has no right of reimbursement, because his liability exceeds the value of his right of reimbursement. By this approach, the creditor’s interests are subordinated to those of the beneficiaries; the law protects the beneficiaries, as far as it can, although this protection comes at the creditor’s expense. Why can the common law trust not be a patrimony? Here we come to the nature of the common law trust. As the legal historian Neil Jones put it: 11 Against whom does the trustee hold this “right” of reimbursement? The trust not being a person, the answer might be, the beneficiaries; but they do not have any corresponding obligation. It is not therefore a right in the strictest Hohfeldian sense; it is rather in the nature of a Hohfeldian power, held by the trustee, to apply trust assets towards his own reimbursement. See W N Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 3rd printing with new foreword by A L Corbin (1964). 12 Jennings v Mather [1902] 1 KB 1. 13 Again, the full argument, with citations to authority, is in Smith (n 9).

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“The interest of cestui que trust [the beneficiary] depends upon the interest of the trustee: the creation of a trust is a process of cumulation, and not division.”14 The words “depends upon” are very well chosen. The interest of the beneficiary is like an encumbrance on the trustee’s interest. But unlike such encumbrances as hypothecs or charges, the beneficiary’s interest is a kind of super-encumbrance that carries with it the benefit of the property. The heart of the common law trust is the trustee’s obligation with respect to the benefit of particular property. The beneficiary’s interest is the right that corresponds to that obligation of the trustee. And the beneficiary’s interest has a proprietary aspect, in that some aspects of the beneficiary’s rights may bind transferees of the particular rights held in trust.15 But despite the commonly encountered metaphor of divided title or equitable ownership, the beneficiary does not have a real or in rem right in the trust property itself. One proof of this is that the beneficiary’s interest never binds third parties except those whose rights derive from the rights of the trustee; this shows that the beneficiary’s interest binds the trustee’s rights in the trust property, not the trust property itself. Another proof, which is even more important but which is really the same phenomenon seen from a different angle, is that the beneficiary has no direct rights against third parties who may have wrongfully caused damage to the trust property, but who did not acquire rights in the trust property from the trustee.16 In the absence of a transfer or other dealing with the trust-encumbered rights, the beneficiary’s only recourse is indirect, rather like that of the trust creditor. Vis-à-vis third parties who do not acquire rights from the trustee, the beneficiary generally depends upon the trustee to take action for the benefit of the beneficiary.17 14 N Jones, “Trusts in England after the Statute of Uses: a view from the sixteenth century”, in R Helmholz and R Zimmermann (eds), Itinera Fiduciae: Trust and Treuhand in Historical Perspective (1998) 173 at 190. 15 This understanding, and the propositions that follow in the text, are explored in more detail in L Smith, “Transfers”, in P Birks and A Pretto (eds), Breach of Trust (2002) 213; L Smith, “Philosophical foundations of proprietary remedies”, in R Chambers, C Mitchell and J Penner (eds), Philosophical Foundations of Unjust Enrichment (2009) 281; and B McFarlane and R Stevens, “The nature of equitable property” (2010) 4 J of Equity 1. 16 Leigh and Sillavan Ltd v Aliakmon Shipping Co [1986] AC 785; Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12; MCC Proceeds Inc v Lehman Brothers International (Europe) [1998] 4 All ER 675; American Law Institute, Restatement of the Law Third: Trusts, vol 4 (2012) § 107. 17 Rarely, the beneficiary may be allowed to proceed against a third party without the cooperation of the trustee: Hayim v Citibank N A [1987] AC 730 at 747-748. But even in this case, he is exceptionally allowed to enforce the trustee’s rights; this is shown by the requirement that the beneficiary must name the trustee as a co-defendant: Shell UK Ltd v Total UK Ltd [2010] EWCA Civ 180; [2011] QB 86 at paras 111-144; Roberts v Gill & Co [2010] UKSC 22; [2011] 1 AC 240 esp at para 62, where Lord Collins mixes together trusts and estates, which however are similar



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So we see why a common law trust can only ever be a trust of assets. It is possible to encumber one’s assets, making them subject to another’s rights. It is not possible to encumber one’s obligations. It is not sensible to try to imagine that one person can have rights in or over another person’s obligations. C. … IN THE COMMON LAW (1) Trusts and estates This shows us how different is the trust of Scotland from the common law’s trust. But I promised to tell a different story, a story of commonality, and I now turn to that. In the front of every common law trusts book there is a section on differentiation, aimed at showing what is special about trusts. “Trust and contract”, “trust and agency”, “trust and bailment”; so go the subheadings, not always distinguishing differences in the nature of antinomies – an employee cannot be an independent contractor – from differences in the nature of separate but potentially overlapping categorisations – a company director is different from a shareholder, but a person can be both at once.18 One of the sub-headings is, “trust and the administration of the estate of a deceased person”. The textbooks all tell us that an estate under administration is not a trust; although of course it is possible for an executor to constitute a will trust, pursuant to the directions in a will. And the books typically identify some of the differences between the rules that apply to executors, and those that apply to trustees.19 But as to why the estate is not itself a trust, the books are not so clear. There is a famous case on the subject, Commissioner of Stamp Duties (Queensland) v Livingston, decided by the Judicial Committee of the Privy Council in 1964.20 A testator died in 1948, leaving one third of the residue

on this point: “joinder also has a substantive basis, since the beneficiary has no personal right to sue, and is suing on behalf of the estate, or more accurately, the trustee”. Once the trustee is joined to the action, the court can see to the enforcement of the trustee’s legal rights against the third party, for the benefit of the beneficiary. 18 To mention one important example, the categories of trustee and agent are very different, but are not mutually exclusive in the common law. A trustee who acts under the direction of his beneficiaries (as in what is often called a bare trust) may be their agent, and they his principals, with all of the normal incidents for the liability of the principal to third parties, and without excluding the relationship of trustee-beneficiary. See Trident Holdings Ltd v Danand Investments Ltd (1988) 64 OR (2d) 65, 49 DLR (4th) 1. 19 We will return to this later, in section D. 20 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694.

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of his estate to his widow. She in turn died intestate in 1950. At the time of her death, the husband’s estate was still being administered, and the residue of his estate had not been ascertained. The assets still held in the husband’s estate at the time of the widow’s death included property in Queensland. The question was whether her estate was liable to Queensland succession duty in respect of the rights that she held, at the time of her death, in relation to these Queensland assets in her husband’s estate. Under the governing legislation, the issue was whether, upon her husband’s death she had acquired – a phrase beloved of common lawyers – a “beneficial interest” in property in Queensland. The answer of the Judicial Committee was clearly, no. The case stands for the proposition that the interest of a legatee is not comparable to the interest of the beneficiary of a trust. The reasons, however, are not quite so clear. We can find two strands of thought in the advice of the Board, given by Viscount Radcliffe. One is that the trust device is unsuitable to the administration of an estate. Viscount Radcliffe said that an estate could have been treated as a trust fund; but, he said:21 It would have been a clumsy and unsatisfactory device from a practical point of view; and, indeed, it would have been in plain conflict with the basic conception of equity that to impose the fetters of a trust upon property, with the resulting creation of equitable interests in that property, there had to be specific subjects identifiable as the trust fund. An unadministered estate was incapable of satisfying this requirement. The assets as a whole were in the hands of the executor, his property; and until administration was complete no one was in a position to say what items of property would need to be realised for the purposes of that administration or of what the residue, when ascertained, would consist or what its value would be.

This, with respect, seems like an unsatisfactory explanation as to why an estate cannot be understood to be a kind of trust. It is true that no one can know what items might need to be realised, and so taken out of the estate; they might be needed to pay creditors, or to satisfy legacies that have a higher priority. But this situation is also one that can arise in a trust. The interest of the beneficiary of a common law trust is often subject to defeasance by discretionary powers held by the trustees, or even by others, who may thus have the ability to transfer property, even all of the property, out of the trust. Indeed, this is increasingly common in modern trusts, which may even give trustees the power to add or delete beneficiaries.22 The claims of 21 At 707-708. 22 This is not necessarily a good thing. Donovan W M Waters has described “… the picture of a beneficiary who has travelled from a position in Lord Nottingham’s England at the centre of the trust to today’s position of being a hopeful individual with his cap in his hand at the fringe



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creditors, of course, often need to be met out of trust property. The mere fact that a beneficiary’s claim is defeasible does not prevent characterisation as a trust. In the quoted passage, Viscount Radcliffe also seemed to suggest that an estate could not be a trust fund, because the assets were insufficiently ascertained. He implied that the assets in an estate are as difficult to identify as the guests at the unauthorised teenage party that is every parent’s nightmare; coming and going, unannounced in both directions, many unfamiliar and most never to return. It is not easy to understand, however, the way in which this concern applies to the assets in an estate. An executor is supposed to know what is in the estate, and to keep accounts that track its ongoing acquisitions and distributions. And this is true of trusts as well. The days when trusts were unchanging land holdings have long passed; the modern trust is almost always a fluctuating pool of assets. It is not tenable to suggest that this fluctuation is inconsistent with the certainty of subject matter required for a trust. So let us consider another line of reasoning in the judgment. Viscount Radcliffe also said:23 whatever property came to the executor virtute officii came to him in full ownership, without distinction between legal and equitable interests. The whole property was his. He held it for the purpose of carrying out the functions and duties of administration, not for his own benefit; and these duties would be enforced upon him by the Court of Chancery, if application had to be made for that purpose by a creditor or beneficiary interested in the estate.

We have seen that it is difficult to draw a distinction between trusts and estates that is based on the defeasibility of the beneficiary’s interest. An estate cannot be disqualified from being a trust merely because a person who seems to have an interest might end up with nothing. This is true for

of the structure”: D W M Waters, “The future of the trust from a worldwide perspective”, in D J Hayton (ed), The International Trust, 3rd edn (2011) 837 at 884. At least for the time being, however, such wide-ranging powers are accepted as a permissible incident of the trust. See L Smith, “Mistaking the trust” (2010) 40 HKLJ 787. 23 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at 707. See also at 712: “Where, it is asked, is the beneficial interest in those assets during the period of administration? It is not, ex hypothesi, in the executor: where else can it be but in the residuary legatee? This dilemma is founded on a fallacy, for it assumes mistakenly that for all purposes and at every moment of time the law requires the separate existence of two different kinds of estate or interest in property, the legal and the equitable. There is no need to make this assumption. When the whole right of property is in a person, as it is in an executor, there is no need to distinguish between the legal and equitable interest in that property, any more than there is for the property of a full beneficial owner.”

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estate beneficiaries, because prior debts or legacies may exhaust the estate; but it is also true in trusts, because the exercise of dispositive discretions may also exhaust the trust fund, to say nothing of liabilities rightly incurred in the administration of the trust.24 But in this second passage, Viscount Radcliffe’s argument is not built on the nature of the beneficiary’s interest; it is built on the nature of the interest held by the executor. Let us consider the idea that the executor has the “whole property”, “without distinction between legal and equitable interests”. This means that he holds the legal title – which everyone knows – but that his legal title is not subject to an equitable interest, in the sense known to the law of trusts.25 It is not encumbered by a beneficial interest in the assets of the estate, even though the estate beneficiaries have, of course, claims against the executor, in relation to the administration of the estate.26 This would suggest that the interest of a legatee of an estate is only a personal claim against the executor.27 This is supported by Viscount Radcliffe’s 24 I use the phrase “estate beneficiaries” to identify those who will benefit from the estate of a deceased person, including legatees and those entitled on intestacy. In this sense, I contrast it with the term “trust beneficiaries”, because my goal is to elaborate the juridical differences between the interests held by persons in the two categories. 25 Of course, if the deceased had held an equitable interest of some kind, then this would be transmitted to the executor, who in such a case would not hold any legal title. But the point in the text would remain true: the estate beneficiaries would not have any interest as this is understood in the common law of trusts (even though it is quite possible, in the common law of trusts, for an equitable interest to be held in trust for beneficiaries). 26 The point is discussed in R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies, 4th edn (2002) 127-129. Those authors are reluctant to accept that the interest of the estate beneficiary is not, in some sense, a property right, although as they acknowledge this is essentially a question of terminology. The feature of alienability, to which they devote some attention, is however a feature of almost all rights, personal and proprietary, and is not diagnostic of property rights in the strict sense that excludes personal rights. The ability to settle an interest in trust is even less so: it is possible to create a common law trust over any interest, whether it is a personal right or a proprietary right, and even in many cases over an interest that cannot itself be alienated: Don King Productions Inc v Warren [2000] Ch 291. This is exactly how the assignment of debts took place for centuries, when debts could not be assigned according to the common law. 27 In assessing the nature of the estate beneficiary’s interest, one might ask whether there is a distinction between a specific legatee and a residuary legatee; and, in the former case, between a pecuniary legacy (“$1,000 to John”) and a genuinely specific one (“my Henry Moore sculpture to John”). Even the most specific legacy, however, can be lost if the claims of creditors so require; and specialist texts are careful to note that even in that context, regardless of the terms of the will, the specific legatee has no interest in the asset before the executor assents to the legacy: J R Martyn and N Caddick, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 19th edn (2008) 1153; see also R Kerridge and A H R Brierley, Parry and Kerridge: The Law of Succession, 12th edn (2009) 582, noting that some cases have suggested that the beneficiary of a specific gift may have a beneficial interest in it before assent; but the authors are doubtful that this is correct. By the assent, the executor indicates that the property is not needed for administration and is available for the instructions in the will. The assent can pass legal own-



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later description of the widow’s interest as a chose in action.28 It is also supported by the fact that he places creditors alongside estate beneficiaries, when describing their rights.29 Remember that he said, the executor’s duties “would be enforced upon him by the Court of Chancery, if application had to be made for that purpose by a creditor or beneficiary interested in the estate”.30 Everyone would accept that the interest of a creditor is only a personal claim; this passage, which follows Viscount Radcliffe’s observation that the executor holds full ownership of the estate assets, indicates that the interest of a legatee is also only a personal claim.31 As we have already seen, the interest of a trust beneficiary may be defeasible, either by the exercise of a dispositive power in favour of its objects, or by the lawful (or indeed sometimes unlawful) use of trust property to pay creditors. So the fact that an estate beneficiary cannot be sure that any particular asset will ultimately be available for distribution does not clearly give us a difference between trust beneficiaries and estate beneficiaries. The true difference is a conceptual one. Trust beneficiaries have a kind of interest in the trust property from time to time, albeit an indirect interest in the nature of an encumbrance on the trustee’s rights in the trust property. Trust creditors do not; the traditional position is that unsecured trust creditors have claims only against the trustee, whose personal assets are subject to execution even in the case of debts properly incurred in the administration of the trust. And creditors, whether personal creditors of the trustee or trust creditors, have no direct claim against the trust assets, which are encumbered by the interests of the beneficiaries. By contrast, in an estate, the position of estate creditors and estate beneficiaries differs less in quality and is more a matter ership of an asset to the legatee, or create an equitable interest, depending partly on the nature of the property in question. It may also be retroactive to the date of death. 28 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at 717. A chose in action is a purely personal claim. 29 Estate creditors and estate beneficiaries are also treated as having a parallel interest in respect of the “special equitable claim” that was discussed and allowed in Re Diplock [1948] Ch 465, aff’d Ministry of Health v Simpson [1951] AC 251. See S Whittaker, “An historical perspective to the ‘special equitable action’ in Re Diplock” (1983) 4 JLH 3; L Smith, “Unjust enrichment, property, and the structure of trusts” (2000) 116 LQR 412 at 437-444. 30 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at 707, emphasis added. 31 This is exactly why it was questionable for Dillon LJ to suggest, in Hunter v Moss [1994] 1 WLR 452 at 457-458, that since it is possible to make a bequest of fifty shares out of 200, therefore it follows that a declaration of trust of fifty shares out of 200 is valid without further identification of the trust shares. The bequest does not create a present interest, and is only an instruction (giving rise to a personal claim) until such time as it executed. This does not entail that the decision is incorrect, only that the validity of the bequest does not demonstrate anything about the creation of a trust.

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of degree. So far from having no direct claim on the assets, as in the case of a trust, in an estate the estate creditors have a prior claim on the estate assets. In the estate, the creditors come ahead of the beneficiaries; in a trust, we might say they come behind them, although the truth is they are in a different conceptual category, having no direct recourse against the trust assets. (2) The position of estate beneficiaries The idea that estate beneficiaries are in the same conceptual category as estate creditors supports the assertion that estate beneficiaries have only a chose in action; they themselves are claimants on the estate, whose claims rank after the claims of creditors. Of course, it is possible to argue that estate beneficiaries have some kind of interest in the assets of the estate.32 But any such argument would probably prove too much, because it would show that estate creditors also have such an interest. As far as whether their claims are personal or proprietary, estate creditors have the same kind of rights as estate beneficiaries to, or in respect of, the assets in the estate; the only clear difference is that the creditors rank first.33 So an argument that seeks to show that estate beneficiaries have a proprietary interest in the estate assets will end up showing that estate creditors also have such an interest, which seems indefensible.34 The best parallel is probably the winding up of a 32 See n 26 above. 33 It is true that creditors’ claims are not open-ended, but are claims to some performance or prestation, typically calculated as an amount of money. Some estate beneficiaries (such as residuary legatees) have residual or open-ended claims. But although this feature may be important economically, from a legal perspective it is only relevant to the size of the claim, and the priority attached to it. As far as whether their rights are personal or proprietary, all estate beneficiaries are usually understood to have the same kinds of rights, whether they are beneficiaries of a pecuniary legacy, a specific legacy, or a residuary legacy; this changes only upon the assent of the personal representative (see n 27 above). This is certainly the implication of Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694. 34 One complication for the view that estate beneficiaries have only personal claims against the estate might be the in rem claim recognised in Re Diplock [1948] Ch 465 (which was, strictly speaking, obiter dicta (see at 516-518 and 557) and which was not appealed to the House of Lords). The in rem claim allowed the specific recovery of the traceable proceeds of estate assets improperly distributed to charities. The availability of this proprietary claim might appear to assimilate the position of estate beneficiaries to that of trust beneficiaries, and thus to be inconsistent with the view articulated in Livingston and elsewhere that estate beneficiaries have only a chose in action against the estate. A careful reading of Re Diplock, however, shows that the court viewed the in rem claim as one brought for the benefit of the estate (including creditors). Some passages (e.g. at 522) refer to the plaintiff next-of-kin as “interested” or as having an “equitable interest” in the estate assets; however, others (e.g. at 522-523, 547 and 555) indicate that the next-of-kin recover “for the benefit of the estate” and that the assets in question never ceased to belong in equity “to the estate” (that is, to the personal representatives in that capacity). Note also that all recoveries in the case were in favour of the judicial trustee who had taken the place



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corporate entity. Just as in an estate, creditors of a corporation in liquidation are entitled to be paid first, and may be ranked among themselves by priority to promote certain policy considerations. Shareholders come next, and may also be ranked among themselves (preferred and ordinary). This corresponds to estate beneficiaries, inasmuch as once the debts of an estate have been paid, the legacies are to be satisfied but according to an order (specific before residuary). And this analogy also sheds light on the nature of the estate beneficiary’s interest. In law, the shareholders of a corporation do not have any proprietary interest in its assets, even while it is being wound up; and yet shareholders are often said to be the proprietors of the enterprise carried on by the corporation. This is true, not in a legal but in an economic sense. The same may be said of the estate beneficiary: she is very much economically interested in the estate, particularly if she is a residuary legatee, but this does not entail that she holds rights in the assets of the estate.35 If estate beneficiaries are in the same conceptual category as estate creditors, then we have the beginnings of something interesting. Let us consider the position of the creditors of the deceased, whose claims survive against the estate.36 They can sue the executor, but (apart from a case of maladministration) they cannot touch his personal assets, only the assets of the estate. But they do have direct access to the assets of the estate lying in the ownership of the executors; there was no direct recovery by the next-of-kin. Just as creditors are usually the ones who bring the personal action that was allowed in Re Diplock, there is no reason to doubt that they could also bring an in rem proceeding for the benefit of the estate as a whole. This shows that the in rem claim does not depend on the nature of the interest held by the plaintiff, but rather is a kind of representative action, of the kind discussed in Roberts v Gill & Co [2010] UKSC 22; [2011] 1 AC 240 by which creditors and estate beneficiaries may be given standing to enforce a claim that is actually held by the personal representatives in that capacity. 35 The analogy between an estate and the winding up of a corporation was drawn in Butler v Broadhead [1975] Ch 97, in the context of an attempt by a company creditor to deploy the “special equitable action” recognised in Ministry of Health v Simpson [1951] AC 251. It was decided, however, that the action was implicitly excluded by the legislation governing the winding up. In Ayerst (Inspector of Taxes) v C & K Construction Ltd [1976] AC 167, the House of Lords held that a company in liquidation does not have the beneficial ownership of its own assets (at least for the purposes of income tax legislation). Lord Diplock stated (at 177-178) that this did not imply that there was a trust, nor that the beneficial ownership was in anyone else. This decision was based in part on an analogy with Livingston, and Lord Diplock suggested as well that a trustee in bankruptcy is not a beneficial owner even though there is no one else who is. See also Meagher et al, Equity Doctrines and Remedies (n 26) 131-133, doubting the decision in Ayerst. 36 In modern law, all claims typically survive against the estate. This has not always been true, particularly in relation to tort claims. Indeed, before the rise of indebitatus assumpsit, even simple debt claims lying against the deceased could not be brought against executors, according to the common law (although claims based on a deed were allowed). However, at least until the early sixteenth century, many debt claims were brought in ecclesiastical courts, and they did not apply the same restrictions: see R Helmholz, “Debt claims and probate jurisdiction in historical perspective” (1979) 23 AJLH 68 at 74-76.

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of the executor. And conversely: personal creditors of the executor cannot touch the assets of the estate, even though the executor is the legal owner of them. This is not merely a rule of Chancery; as long ago as 1792, we see the Court of King’s Bench holding in Farr v Newman37 – not unanimously, but by a three-to-one majority – that estate assets could not be seized by personal creditors of the executor, even though the executor owned those assets according to the common law. In the words of Lord Kenyon CJKB. “A more momentous question never came before the Court; inasmuch as it may respect the property of every man in the kingdom …”38 Let me recapitulate the features of the estate under administration in the common law. All of the ownership is in the hands of the executor, without distinction between legal and equitable interests. At the same time, he is not at liberty to use that property for his own benefit. In the hands of the beneficiaries, there is nothing but a personal right against the executor, to have the estate properly administered. Personal creditors of the executor cannot touch the estate assets, even though those assets belong in some sense to the executor. And creditors of the deceased also enforce their claims against the executor as debtor, but conversely they have no access to the executor’s personal assets (except in a case of maladministration, leading to his personal liability). Unlike trust creditors, though, estate creditors have direct access to the assets of the estate, ahead of the beneficiaries and regardless of whether the executor has committed a breach of his obligations to the beneficiaries. In other words, we have a Scottish trust. Every estate of a deceased person in the common law follows the logic, not of the common law trust, but of the Scottish trust. Why is this hidden from our eyes? Perhaps mainly because the common law does not have or use the notion of patrimony; more generally, if simplistically, because the common law is more concerned about results than about explanations for those results. All of the doctrines of Chancery have yet to be subjected to the kind of careful analysis beloved of Bill Wilson, to which the common law that governs contracts and torts has been subjected quite closely since the late nineteenth century.39 But whether the common law chooses to use the term or not, it is fair to say that in civilian terms, the 37 Farr v Newman (1792) 4 TR 620, 100 ER 1209. 38 At 647, 1223. 39 W A Wilson, “The importance of analysis”, in D L Carey Miller and D W Meyers (eds), Comparative and Historical Essays in Scots Law: A Tribute to Professor Sir Thomas Smith, QC (1992) 162. On some of the reasons why Equity has not been systematised, see L Smith, “Common law and equity in R3RUE” (2011) 68 Washington and Lee LR 1185 at 1187-1193.



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estate of a deceased person is a separate patrimony, while a common law trust is not. What does the common law say? In 2003, Lady Arden, sitting in the Court of Appeal of England and Wales, described an estate as “a person without legal personality”.40 This, it seems to me, is not a bad description of a separate patrimony, coming from a legal tradition that lacks the concept.41 We can also notice how the Court of King’s Bench tried to explain its holding in Farr v Newman.42 Two of the judges in the majority relied largely on the self-evident absurdity of allowing a personal creditor of the executor to seize assets of the deceased. But Grose J, who gave the first judgment, sought to identify the underlying principles:43 Such being the undoubted law, as to some of the points I have taken notice of, one may fairly be permitted to ask, why may not the executor devise the testator’s goods? Why may not his administrator take them? Why are they not forfeited to the Crown on the attainder? Why are they not liable to be seized under a commission of bankrupt against the executor? The answer and reason is, I think, obvious. It is because they are not his goods: he is only the distributor and dispenser of them for the benefit of the creditors, the legatees, and the next of kin of the testator.

They are not his goods, even according to the common law; and yet they are his goods, according to the common law. The only way to make sense of this is to understand that the assets of the deceased are held, along with the debts of the deceased, in a separate patrimony. (3) Historical foundations How did this happen? How did something that has been part of the English and common law landscape for centuries turn out to be, all along, consistent with the analysis of the Scottish trust that emerged in the late twentieth century? One is reminded of David Lodge’s novel Small World, in which there is a character, Persse McGarrigle, who claims to have written a thesis about the influence of T S Eliot on William Shakespeare.44 He decided that this was 40 Piggott v Aulton [2003] EWCA Civ 24, [2003] RTR 540 at [21]. I thank Charles Mitchell for the reference. 41 The absence of the concept of patrimony from the common law is discussed in P Matthews, “From obligation to property, and back again? The future of the non-charitable purpose trust”, in D J Hayton (ed), Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (2002) 203 at 213-216. For an example of an English judge touching on the concept, only to resist engaging with it, see Re Piercy [1895] 1 Ch 83 at 88. 42 (1792) 4 TR 620, 100 ER 1209. 43 At 629, 1213. 44 D Lodge, Small World (1984).

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more interesting than looking at it the other way around. In fact, this way of looking at it helps us to understand this seeming paradox. The common law of testate succession is, in a very real sense, based on Roman law. Let me show how this is so. In the early days of the common law one could not make a will of freehold land; this is one of the reasons why people created uses of land. Uses, which were the forerunners of trusts, allowed people to control what would happen to their land after their death, through a mechanism that involved only inter vivos transfers, which the common law did permit. But the result was that while the common law trust was being born, the common law of succession to freehold land was entirely mandatory. One could, however, make a will of movable property; and the law of succession to movable property was not governed by the common law, nor did the common law courts regulate it. It was governed by the law of the Church, administered in church courts. And the canon law of the Church was, of course, inspired and informed in many ways by Roman law. If we look at legal history across Europe, we find a wide variety of approaches to testamentary executors, at different times and in different places, and also a wide variety of approaches to a testator’s ability to name an heir, who (in the civilian sense of the word “heir”) would take the assets and the liabilities of the deceased by universal succession, subject only to the obligation to pay particular legacies. Sometimes, a will was not valid unless it named an heir; sometimes, a will could not name an heir, often on the view that only God could choose the heir.45 It may seem paradoxical, but it is a fact, that in respect of movable property, the Church had more success in England than in just about any other country in importing its version of civilian succession law.46 It established curial jurisdiction over succession to movables, a jurisdiction which at its height was more extensive than anywhere on the continent, and which, in relation to proof of wills, lasted until 1857.47 Long before then, however, the Court of Chancery took over the contentious aspects of the administration of estates, bringing to bear its doctrines on fiduciary obligations.48 45 R Zimmermann, “Heres fiduciarius? Rise and fall of the testamentary executor”, in Helmholz & Zimmermann (eds), Itinera Fiduciae (n 14) 267. 46 At 302. 47 J H Baker, An Introduction to English Legal History, 4th edn (2002) 387; for a full account, W Cornish, J S Andreson, R Cocks, M Lobban, P Polden and K Smith, “1820-1914: English legal system”, in J H Baker (ed), The Oxford History of the Laws of England, vol 11 (2010) 692-714. 48 W S Holdsworth, A History of English Law, 9 vols, repr edn, vol 6 (1966) 652; see also Whittaker (n 29) at 12-13.



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One result of this is that in English law, the executor became more powerful than anywhere else.49 The English executor was and is a universal heir, in the sense that he takes all the assets and liabilities of the deceased at the moment of death; but an heir who takes them in a fiduciary capacity, with a duty to carry out the wishes of the deceased.50 For the common law reader, characterising the executor as an “heir” might seem strange, because the executor typically receives nothing for his own benefit. But from the civilian perspective, the common law seems strange in treating the person who is entitled to the residue as a mere legatee.51 The basic civilian picture is that the heir is the person who, whether chosen in the will or by a rule of law, takes the whole estate, both assets and liabilities, although he is required to pay not only the testator’s debts but also the legacies. Once the debts and legacies are paid, he can keep the residue. Thus the heir, who will take the residue, is by definition not a legatee. An executor, in this picture, is an optional add-on. This, then, is what it means to say that the common law executor is a fiduciary heir: he is an heir in the civilian sense, who takes the whole estate – the whole patrimony, assets and liabilities. But he is a fiduciary heir, who takes it not for his own benefit. And in this system, strangely to civilian eyes, the person who takes the residue is not the heir, but merely a legatee. The common law executor as a civilian heir explains many features of common law executorship that are otherwise difficult to understand.52 In 49 Zimmermann (n 45) at 303; R Caillemer, “The executor in England and on the Continent”, in Select Essays in Anglo-American Legal History, vol 3 (1909) 746 at 763. Anywhere else, except perhaps Scotland: W D H Sellar, “Succession law in Scotland – a historical perspective”, in K G C Reid, M J de Waal, and R Zimmermann (eds), Exploring the Law of Succession: Studies National, Historical and Comparative (2007) 49 at 61. 50 O W Holmes, “Executors” (1895) 9 HarvLR 42 at 43, reprinted as O W Holmes, “Executors in earlier English law”, in Select Essays in Anglo-American Legal History, vol 3 (1909) 737 at 738-739; Caillemer (n 49) at 756-763; M M Sheehan, The Will in Medieval England (1963) 161. Caillemer cites a line from St Germain’s Doctor and Student (1518) Dialogue I c 19 in fine: “… the heir, which in the laws of England is called an executor …”. 51 See Zimmermann (n 45) at 303: “Even today [in the common law], the person who receives the remainder of the estate is formally only a residuary legatee.” 52 In Farr v Newman (1792) 4 TR 620, 100 ER 1209 at 628, 1213, Grose J quoted Sir Edward Coke’s report of Pinchon’s Case (1572) 9 Co Rep 86b, 77 ER 859, in which it is stated (at 88b, 863) that executors “… are but ministers and dispensers of the goods of the dead”. The characterisation of such a person as “minister” is seen in the glosses of the continental ius commune and indeed in the Digest of Justinian: see M Graziadei, “The development of fiducia in Italian and French Law from the fourteenth century to the end of the ancien régime”, in Helmholz & Zimmermann (eds), Itinera Fiduciae (n 14) 327 at 334 n 25 and 338-340. This establishes the civilian roots of a provision (art 869) in the Civil Code of Lower Canada, Quebec’s first civil code, which codified a body of law that was received from pre-revolutionary France and then subjected to local amendments. Art 869 referred to legacies to “légataires seulement fiduciaires

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early Roman law, one of the risks of becoming an heir was that the deceased’s debts might exceed the assets, and since the heir succeeded to both, the outcome would be that the heir would be required to use his own assets to cover some of the deceased’s debts. This was mitigated under Justinian by the possibility of a kind of conditional acceptance: acceptance under benefit of inventory, which survives in the modern civil law. The early English law also seems to have seen the executor as personally liable, but this eventually evolved into the position, already described, that the assets and liabilities of the deceased formed a patrimony separate from the executor’s personal patrimony.53 But the understanding of the executor as universal successor helps us to understand the old rule that a debt owing by the executor to the deceased was dissolved at the moment of death: until the idea of separate patrimonies evolved, a person could not be liable to himself.54 This leaves strange traces in the modern law, in the form of the “rule in Strong v Bird”.55 Even more strikingly to modern eyes, it used to be the law that an executor could take the residue of the estate for his own benefit, in the absence of any legacy of the residue. This makes perfect sense when the executor is seen as a civilian heir, but not when he has evolved into a fiduciary administrator; that is, a kind of trustee.56

ou simples ministres”; in the English text, “… legatees who shall be merely fiduciary or simply trustees”. See also M Cantin Cumyn, “L’origine de la fiducie québécoise”, in Mélanges PaulAndré Crépeau (1997) 199 at 200-203. 53 For the earlier position, see Holmes (n 50) at 738-740. The full passage from St Germain’s Doctor and Student (1518) Dialogue I c 19 in fine mentioned earlier reads: “… if the heir make not his inventory, he shall be bound after the law civil to all the debts, though the goods amount to not so much: and the law canon is not against that law, and yet in conscience, the heir, which in the laws of England is called an executor, is not in that case charged with the debts, but according to the value of the goods”. 54 See Caillemer (n 49) at 763. 55 Strong v Bird (1874) LR 18 Eq 315. The case itself shows that the common law principle described in the text still exists, although its effects may be modified by Equity. The “rule” has since evolved into a different principle, which may perfect unperfected gifts in favour of an executor: see D W M Waters, M Gillen and L Smith, Waters’ Law of Trusts in Canada, 4th edn (2012) 226-235. It is a universal truth that when a rule is named after a case, it is poorly ­understood, difficult to reconcile with other principles of law, or both. 56 See Caillemer (n 49) at 764-768. As he notes, the law on this point was changed by the Executors Act 1830, 11 Geo IV & 1 Will IV, c 40, whose section 1 provided that “such executor or executors shall be deemed by courts of equity to be a trustee or trustees” for the statutory next of kin, unless the executor was expressly granted the residue beneficially. The mere fact that the executor had to be made by statute into a (constructive) trustee illustrates the conceptual distance between the original ideas. This provision, which was enacted as Imperial legislation, is still in force in some parts of the Commonwealth, and has been carried into other legislation elsewhere.



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D. TRUSTEES AND PERSONAL REPRESENTATIVES IN THE COMMON LAW This helps us to understand how the estate of a deceased person is both a trust, and, as Commissioner of Stamp Duties (Queensland) v Livingston57 teaches, not a trust. It is not a common law trust, but it is a Scottish trust. The irony is that while the trust, as it is understood in the common law, is peculiar to the common law tradition, yet the estate of a deceased person, as it is understood in the common law, is entirely a creation of civilian thinking. On any given day, as one can imagine, the common law world is full of estates of deceased persons under administration. There are, therefore, Scottish trusts all over the common law world. Nor do they need executors: they may be intestacies, or partial intestacies, under administration by an administrator. The position of the administrator is the same as an executor for these purposes: the administrator becomes the universal successor of the assets and liabilities of the deceased, to administer them in a fiduciary capacity according to the will (if there is one, as in a partial intestacy) and according to the rules of intestacy. It is not surprising that it can be difficult to say in what ways an estate under administration is not a trust.58 The Court of Chancery appropriated jurisdiction over contentious matters of succession in the seventeenth century, and as it developed its principles of fiduciary administration, they were naturally applied to personal representatives.59 This assimilation is only continued by modern statutes, which, in clarifying and enlarging the powers of trustees, often extend their provisions to personal representatives.60 This is typically done by a definitional technique, which assimilates estates to trusts “for the purposes of this Act”. More interesting is the case of legislation in the common law world that provides that an administrator, or even an executor, holds the assets of the 57 [1965] AC 694. 58 Even the leading judgment of Lord Collins in Roberts v Gill & Co [2010] UKSC 22; [2011] 1 AC 240 does not distinguish between cases on estates and cases on trusts. However, for the purposes of the issue there under discussion – whether the personal representative, or the trustee, as the case may be, must be joined to the action where a beneficiary seeks to bring a representative action – the two situations are governed by the same principles. Indeed, as Lord Collins pointed out, the same principles apply when a shareholder brings a representative action to enforce the rights of a corporation. 59 See n 48 above. 60 See for example the Trustee Act 1925 ss 68(17) and 69(1); Trustee Act 2000 s 35. For citations from Canadian common law Trustee Acts, see A H Oosterhoff, R Chambers, M McInnes and L Smith, Oosterhoff on Trusts: Text, Commentary and Materials, 7th edn (2009) 121.

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deceased “on trust” for those entitled to succeed.61 This is not merely a matter of statute-specific definition, and appears to create a statutory trust. Do such provisions overrule the holding in Commissioner of Stamp Duties (Queensland) v Livingston, that an estate is not a trust?62 The consensus is that they do not; apart from the fact that the original legislation pre-dates the decision,63 textbooks on both successions and trusts are able to enumerate many differences between trustees and personal representatives, and these legislative references to personal representatives holding on trust are not understood to modify that long-established law.64 Most of the books tend to suggest, therefore, that the legislation is imprecise in referring to personal representatives as trustees.65 If a personal representative is not, as such, a common law trustee, it is not surprising that difficulties have been created by the habit of naming the same person or persons in both capacities. This is a common practice, and has been for centuries.66 If the testator names A as his executor and B as the trustee of the testator’s will trust, then the instruction to create the trust is one of many duties binding on A, who will also have to pay the testator’s debts and so on. Eventually, if the estate is sufficient, A will transfer the relevant property to B who (if he accepts the trust) will hold it on the trusts declared in the will. Very often, however, A is named as “executor and trus61 See the Administration of Estates Act 1925 ss 33, 46 and 49; for citations from Canadian common law succession legislation, see Oosterhoff et al, Trusts (n 60) 121. 62 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694. 63 We have already seen one important example in the Executors Act 1830 (n 56 above). That legislation was not intended to change the juridical nature of executorship, but only to eliminate the executor’s ability to take beneficially in the absence of a clear intention that he should. It seems quite possible that the language in the modern statutes derives from this provision. 64 Examples include differing powers of disposal of personalty (trustees must act together, while personal representatives may act individually); differing limitation periods in some jurisdictions; and the difference that in the absence of statutory intervention, a personal representative cannot retire (for English law, see the Administration of Justice Act 1985 s 50, allowing replacement with the approval of the court). One difference that is not often noticed in trusts texts is that while a trustee has a duty to inform trust beneficiaries of the existence of the trust, it seems that an executor, in English law at least, is under no duty to inform estate beneficiaries of their rights, even if their legacy is conditional and they may lose it due to their being unaware of the condition: J Sunnucks, “The executor’s duty to inform” (1995) 145 NLJ 1408. This is said to be based on part on the fact that a will, at least if formally proved, is a public document. 65 For example, F W Maitland, Equity; also, The Forms of Action at Common Law: Two Courses of Lectures (ed by A H Chaytor and W J Whittaker, 1929) 48-49 (Lecture IV on Equity); J Mowbray, L Tucker, N Le Poidevin, J Brightwell and E Simpson, Lewin on Trusts, 18th edn (2008) 10. Perhaps another solution is to read the legislation as referring to a Scottish trust, which as we have seen has been the estate’s structure for centuries. 66 N Jones, “Wills, trusts and trusting from the Statute of Uses to Lord Nottingham” (2010) 31 JLH 273 at 283-294.



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tee”. Since there are differences between the roles, it may be very important to know whether and how A changes from being an executor into being a trustee.67 And yet, it is not easy, particularly because it is quite common in modern practice, at least in Canada, to draft the will in such a way that it appears that the whole estate is actually a trust. In this structure, the testator gives all of his property to his “executor and trustee”, and what would otherwise be the terms of the will – legacies, and a clause for the payment of debts – are drafted as terms of a trust.68 It is arguable that this common practice contains a conceptual difficulty. Assume that a testator leaves his Henry Moore sculpture to his friend John. As we have seen, John has no interest in the sculpture until the executor assents to the gift.69 The executor can assent to the gift whenever he wants, so passing legal ownership to John, but if he does so before all the debts and any prior legacies are paid, he risks personal liability to such creditors or legatees, on the basis of maladministration. Now assume that the testator has treated his whole estate as a trust, and that one term of the trust is to transfer the sculpture to John. In principle, the person who is named as executor and trustee is, if he accepts the office, executor from the moment of death; from that moment, he is liable (up to the limits of the estate assets) for the debts of the testator. By contrast, he does not become a trustee until, in his capacity as executor, he assents to the taking effect of the will trust. Arguably, he cannot safely constitute the will trust until the debts are paid; whatever the testator has said, his assets are simply not available for the fulfilment of his legacies (including the creation of the will trust) until his debts have been paid. Although it is traditional for a will to instruct the executor to pay the deceased’s debts, this is hardly necessary; the creditors have the right to be paid, ahead of any legacy, regardless of the terms of the will. The inclusion of a term of the will trust requiring the payment of the deceased’s debts does not obviously solve the conceptual difficulty, because the constitution of the trust is itself the fulfilment of a legacy, that must await the 67 See Attenborough v Solomon [1913] AC 76; Re Cockburn’s Will Trusts [1957] Ch 438; Martyn & Caddick, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (n 27) ch 78; Kerridge & Brierley, Parry & Kerridge: The Law of Succession (n 27) 589-596. 68 In T Sheard, R Hull, and M M K Fitzpatrick, Canadian Forms of Wills, 4th edn (1982), only the simplest form (Precedent 1 at 15, leaving everything to the spouse) does not deploy a trust. Every other form is of the kind described in the text. Compare the will in Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at 704, which directs the constitution of a trust of the whole estate, but “subject to” the payment of the debts. 69 See n 26 above. In Attenborough v Solomon [1913] AC 76 at 82-83, Viscount Haldane LC said for the House: “The will becomes operative so far as its dispositions of personalty are concerned only if and when the executor assents to those dispositions.” This is now also true of realty.

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payment of the debts if the executor is to be certain of avoiding personal liability. Moreover, although a trustee can of course accept a duty (in a trust, it is more likely to be a power) to pay someone else’s debts out of the trust property, nonetheless a creditor, as such, is not a trust beneficiary, and it is highly unlikely that testators wish to promote their creditors into trust beneficiaries.70 It seems conceptually sounder, and more likely to fulfil the testator’s intentions, to separate the roles: the executor, as such, is liable to pay the testator’s debts; once that is done, then if the assets are sufficient the testator’s wishes (including the creation of any will trust) can be carried out. E. EVEN MORE SCOTTISH TRUSTS IN THE COMMON LAW (1) The way of the future? If every estate is a Scottish trust, there are very many of them in the common law. But there may be yet more. For one thing, the estate of a bankrupt person (which in some common law jurisdictions can include a corporation) is probably best analysed in the same way: it has a trustee in bankruptcy, who administers a separate patrimony. Even though this person is called a ­trustee, it is clear that what he administers is not a common law trust.71 An interesting question is whether even common law trusts, in the strictest sense, will become more and more like Scottish trusts. In order to understand this possibility, we need to explore some developments relating to trust creditors in common law trusts. As I have already explained, trust creditors in the context of a common law trust cannot directly touch the trust property. They have only one debtor: the trustee. That is also true in the Scottish trust; but differently from the Scottish trust, the trust creditors in a common law trust cannot lay any direct claim to the trust property. The common law trustee cannot be sued “in his capacity as trustee”, because unlike the executor and the Scottish trustee, he does not have multiple patrimonies which segregate his liabilities.72 He is always personally liable, although he has 70 A creditor does not have an interest in any particular property, including its fruits and revenues, nor the rights of enforcement that belong to a trust beneficiary. See P Millett, “The Quistclose trust: who can enforce it?” (1985) 101 LQR 269 at 288-299. 71 See n 35 above. 72 Of course it is normal and unobjectionable to say that someone, for example, purchased an investment “in his capacity as a trustee”. What we mean is that he used his lawful powers as granted by the terms of the trust. But the common law trustee does not have distinct capacities in the fullest sense, which is why he is always personally liable. Although a trustee may be able to acquire trust assets beneficially (see for example Space Investments Ltd v Canadian Imperial



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a right to be reimbursed out of the trust property. The trust creditors may indirectly access the trust property via that right of reimbursement, but their access is fragile inasmuch as it depends for its existence on the state of the trustee’s rights.73 This logic is thought to create the potential for injustice, particularly in situations where the trust is used as a business organisation and the trustee is engaged in a range of commercial dealings with outsiders who are in good faith.74 One potential injustice is said to be suffered by the trustee, who must engage his personal liability in order to contract in the interests of the trust beneficiaries. It is plain, however, that trustees can protect their personal assets by making it clear in their contractual dealings with outsiders that the outsider’s only recourse is to be against the trust assets; this ­restriction on the rights of the outsider is clearly effective as a contractual term. Another injustice is said to arise in respect of the outsider who contracts with the trustee. This person, as we have seen, cannot touch the trust assets except via the trustee’s rights. There is an important difference here from the problem discussed in the previous paragraph. As we saw, the parties may exclude the trustee’s personal liability. This is an example of the outsider agreeing to a contractual limitation on its own rights. But, returning to the problem of direct access to the trust assets, this is not a matter for contractual allocation. The trustee and the outsider might stipulate in their contract that the third party should have direct access to the trust assets, but this stipulation can have no effects on third parties. In particular, it cannot

Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072), this is by the elimination of the beneficiary’s interest, not by any transfer from one patrimony to another. A common law trustee cannot transfer property from himself “as trustee” to himself “in his personal capacity”; nor, in the unreformed common law, can there be a contract between the same person “as trustee” and “in a personal capacity”. For a classic analysis, see Glennon v Federal Commissioner of Taxation (1972) 127 CLR 503. On the contrary, the common law executor, like the Scottish trustee, can contract in his capacity as such, in a way that does not engage the liability of his personal capacity, although this seems to require that the contract be lawfully made: Martyn & Caddick, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (n 27) 841–844. 73 This was explained above, in the text following n 9. 74 H A J Ford, “Trading trusts and creditors’ rights” (1981) 13 Melbourne U LR 1; M C Cullity, “Legal issues arising out of the use of business trusts in Canada”, in T Youdan (ed), Equity, Fiduciaries and Trusts (1989) 181; D A Steele and A G Spence, “Enforcement against the assets of a business trust by an unsecured creditor” (1998) 31 CBLJ 72; N D’Angelo, “The unsecured creditor’s perilous path to a trust’s assets: is a safer, more direct US-style route available?” (2010) 84 ALJ 833; K J Crossland, “Unsecured creditors and the ‘unincorporation’: issues with trading trusts post global financial crisis” (2011) 17 Trusts and Trustees 185; D J Hayton, “Trading trusts, trustees’ liabilities and creditors”, in Hayton (ed), International Trust (n 22) 523.

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o­ perate to the detriment of the beneficiaries;75 even less can it create a new jural capacity in the trustee, which would be a fundamental change in the law of persons. In other words, this problem of lack of direct access by the creditor cannot be solved by the terms of a contract. The problems for the creditor get a bit worse: if the trustee has lost his right of indemnity against the trust assets, the outsider correspondingly loses any access to the trust property. The trustee might lose that right of indemnity in various ways; perhaps because this particular contractual arrangement was not authorised by the trust terms; or even because he committed an unrelated breach of trust. These matters, too, are typically beyond the knowledge of the outsider. Again, any attempt to address these matters in a contract cannot affect non-parties to the contract. In some jurisdictions, the law has changed so as to give creditors direct access to the trust assets. The clearest example is in the United States, where the Uniform Trust Code has been promulgated as a model law by the Uniform Law Commission.76 The UTC has been enacted as law in twentyfive states, and the District of Columbia.77 The UTC provides, in its section 1010: (a) Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.   (b) A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust ­property, including liability for violation of environmental law, only if the trustee is personally at fault.   (c) A claim based on a contract entered into by a trustee in the trustee’s fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust, may be asserted in a judicial proceeding against the trustee in the trustee’s fiduciary capacity, whether or not the trustee is personally liable for the claim.

This represents a significant change to the common law trust’s original structure. By giving the trustee a new “fiduciary” capacity, it means that the trus-

75 Except in the case in which the trustee is also acting in the role of an agent of the beneficiaries: see n 18 above. In that case, however, the beneficiaries will in any event typically be personally liable as principals. 76 The Uniform Law Commission or ULC is the informal name for the National Conference of Commissioners on Uniform State Laws. 77 It was introduced as a bill in one other state during 2013. This information is from the website of the ULC available at www.uniformlaws.org, which provides the text of model acts and also a “legislative fact sheet” that lists enacting states.



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tee not only has, as he always did, separate collections of assets – those which are his own, and those which he holds in trust – but he now also has separate collections of liabilities.78 In other words, he has separate patrimonies, as in Scots law. It follows that trust creditors have direct access to the trust assets. This may allow creditors to recover from the trust assets, to the detriment of beneficiaries, in cases in which the traditional law would deny the creditors and favour the beneficiaries.79 It is not surprising that this change required legislation.80 There was a similar intervention in the law of the States of Jersey in 2006, when art 32 of the Trusts (Jersey) Law 1984 was amended, so that it now distinguishes between claims against the trustee “as trustee” and against the trustee “personally”. In England, the Trust Law Committee has recommended reform, but the law remains unchanged, as it does generally in the Commonwealth.81 In those jurisdictions, the problems faced by the trust creditor in good faith are real ones. They grow, however, out of the fundamental nature of the common law trust. Not an entity, but only a way of holding rights, it does not involve a separate patrimony and it does not involve multiple capacities on the part of the trustee. The common law trustee, like the British Crown, is one and indivisible. So what does the future hold? The Crown is one and indivisible. But it is not uncommon for the province of Ontario to make an agreement or 78 Ch 21 of the Restatement (3d) Trusts (n 16), whose §§ 105-106 are similar to the UTC provisions, is based on the idea that a trustee has a “representative capacity”. The “fiduciary capacity” of the UTC may be a better choice of label, because it is not clear that the trustee is properly described as a representative. Although the trustee acts in the interests of the beneficiaries, he does not (except in the case where he is also an agent; see n 18 above), represent them, or anyone else, in the usual sense of that word. 79 As in the type of scenario discussed above, text at note 13. Some US commentators suggest that in moving to the new approach, US law is favouring substance over form: see R Sitkoff, “Trust law as fiduciary governance plus asset partitioning”, in L Smith (ed), The Worlds of the Trust (2013) 428 at 435-436. But it is not the case that both the traditional law and the US law have the same substance, with merely different forms; as my example shows, the substantive outcome can be quite different. 80 Although some court decisions pointed in the same direction. Scott and Ascher on Trusts states that during the second half of the twentieth century, US law recognised a “profoundly different concept of trustee liability. While the courts played an important role in developing this new conception, the legislatures played an even more important role.” A W Scott, W F Fratcher and M L Ascher, Scott and Ascher on Trusts, vol 4 (2007) § 26.2. Ch 21 of the Restatement (3d) Trusts (n 16) cites the UTC and treatise authority, including Scott and Ascher. Note that D’Angelo (n 74) argues that a similar result could be reached by judicial development of the law. 81 Trust Law Committee, Rights of Creditors Against Trustees and Trust Funds (1998), available at http://www.kcl.ac.uk/law/research/centres/trustlawcommittee/. See also the discussion in New Zealand Law Commission, Court Jurisdiction, Trading Trusts and Other Issues: Review of the Law of Trusts, Fifth Issues Paper (NZLC Issues Paper 28, 2011) ch 7.

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have a dispute with the country, Canada, of which Ontario forms a part; and we know that Canada can make arrangements or even have disputes with Australia or the United Kingdom. And so the unity of the Crown has become a mere footnote in constitutional law. “For nearly all purposes the idea of the Crown as one and indivisible is thoroughly misleading.”82 If we wish to insist that the Crown remains one and indivisible, we have no longer any choice but to acknowledge that it is made up of a multitude of patrimonies (or, if we prefer, capacities).83 Perhaps this is the future for the common law trust. If the trustee is to have a separate trust capacity, in which he can be separately liable, and in respect of which his creditors will have direct access to the trust property, then the indivisible trustee, like the indivisible Crown, will be no more. The Scottish trust will have exploited its beachhead in the law of succession, and all trusts will be Scottish trusts. (2) Effects on beneficiaries Perhaps that is an exaggeration. But it is important to reflect on the implications of such a development. Money does not grow on trees, and so usually, if someone’s priority has been improved, then all else being equal, someone else’s position has probably been diminished. Granting creditors direct access to trust assets does not really affect the trustee; he could always limit his personal liability, and generally he has no beneficial interest in the trust assets. It affects the beneficiaries. As between trustee and beneficiaries, it makes sense that the trustee can lose his right of indemnification out of trust assets for a contract that he has made, if he has obligations to the beneficiaries arising out of other dealings. It is only when we remember that the good faith creditor’s access to trust property is dependent on the trustee’s right of indemnification, that we see the clash of interests between the good faith creditor and the beneficiary. In purely economic terms, the question of direct creditor access to trust property is really a question of priorities as between creditors and beneficiaries.

82 P Hogg, Constitutional Law of Canada, 5th edn (looseleaf) §10.1. 83 These capacities are distinguished as “the Crown in right of Canada”, “the Crown in right of Saskatchewan” and so on. Courts have sometimes said that while there is only one Crown, it has multiple “purses”: Re Silver Brothers; A-G Quebec v A-G Canada [1932] AC 514 at 524. This is just another way of describing multiple patrimonies in the common law tradition which lacks that concept. Aimed at capturing a slightly different point, but worth noting for the image, is the statement of Binnie J, for the Court, in Wewaykum Indian Band v Canada 2002 SCC 79, [2002] 4 SCR 245 at para 96: “The Crown … wears many hats”.



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In the law of business corporations, the twentieth century saw a progressive move towards favouring the interests of good faith outsiders over investors, when outsiders are potentially harmed by the improper conduct of management. The abolition of ultra vires and the use of estoppel and related techniques mean that shareholders must generally bear the costs of overreaching by management. The analogy might be a good one in relation to those trusts that are used as business associations. Where the trust’s beneficiaries are not people who have chosen to invest in a business undertaking, the analogy is not so clear.84 While some reform initiatives are confined to business or trading trusts, others are not.85 (3) Effects on non-contractual creditors The reform initiatives are aimed in large part at improving the position of good faith creditors in terms of their access to trust property, without regard to the state of the accounts between trustee and beneficiaries. Other aspects, however, are aimed at improving the position of the trustee. Typically, they will clarify that a trustee is not personally liable on a contract entered into in the administration of the trust. As we have seen, this was always something that was possible at common law, although some courts were very strict as to the wording required to prevent the creditor from having access to the trustee’s personal assets. But some reforms extend beyond contractual liability. Recall that UTC s 1010(b) provides that:86 84 There may be extreme cases in which beneficiaries have a surviving enrichment from the contract with the creditor. For example, the creditor lends $100 to the trustee without security; the trustee uses this money to purchase investments held in trust; the trustee fails to repay, and, as a result of unrelated breaches of trust, is liable in breach of trust for $100 or more. The trustee has no right of access to the trust assets and so the creditor has none either. If the trustee is personally insolvent, the creditor cannot recover; while the beneficiaries retain the investments purchased with the lent money (this is adapted from D’Angelo (n 74) at 845-846). Of course, although the creditor may feel that the trustee’s unrelated breaches are irrelevant, the beneficiaries in such a case will say that they are not enriched overall, in the light of the losses caused by those breaches; the example only works if the trustee has caused at least as much loss by a breach of trust as the enrichment that was contributed by the creditor. So even in this supposedly extreme case, the question remains rather simple, whether the traditional priority of beneficiaries over creditors should be reversed. 85 The argument in D’Angelo (n 74) appears to be confined to trading trusts; part of his argument is based on a direct analogy between beneficiaries and shareholders (at 846, referring to the example summarised in my previous note: “the equity investors have been preferred over a creditor”). The UTC, however, applies to all express trusts (s 102, and comment following). The Restatement, paradoxically, does not apply to trading trusts: American Law Institute, Restatement of the Law Third: Trusts, vol 1 (2003) § 1 comment b. 86 Section 1010(c), quoted earlier, confirms that the trustee is liable in his fiduciary capacity. The Restatement (3d) Trusts (n 16) §§ 105 and 106(2) are in similar terms.

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A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, only if the trustee is ­personally at fault.

This may be seen as a natural implication of the creation of a new fiduciary capacity for the trustee, but it could seriously affect the position of noncontractual creditors. In line with other elements of the reform, it assimilates the position of trustees to the managers of a business corporation. In most trusts, the prospect of tortious liabilities may not be tremendously significant. But in the context of business or trading trusts, it is not difficult to imagine the creation of massive extracontractual liabilities, whether through defective products, the release of hazardous or poisonous materials, or other well-known risks of commerce. In such cases, the tortious conduct will usually be committed not by the trustees personally, but by employees. The effect of the quoted provision is that recovery by tort creditors will generally be limited to the trust property, supplemented, perhaps, by the assets of the employee who committed the tort.87 If those resources are inadequate, the trustees are not responsible. In the context of business corporations, the recovery of tort creditors of this kind would usually be limited to the value of the corporate assets. But the creation of a corporate person is a concession from the state that grants it, which may (and typically does) impose requirements of publicity and public law regulation in return for the privilege of legal personality. Trusts, generally, are created privately, and it is not clear why those who create them should have the ability to leave innocent tort creditors without recovery, where the trust fund is inadequate to meet the obligations that the trustees have incurred through the operation of a business enterprise.88 It is true that in many instances, business trusts will attract public law regulation that may be similar to that which applies to business corporations. The question then becomes whether the exclusion of the personal liability of trustees, for actions committed under their direction and control, should not be confined to situations where the public law regulation is sufficient to justify it. There is, it seems to me, a strong argument that in the absence of public law intervention – such as might recognise the creation of a legal person – civil liability should be borne by the person who holds the relevant decision 87 Of course, liability insurance may be in place, but liability insurance responds to the liabilities of private law; it does not shape or constitute them. 88 Again, however, the Restatement (3d) Trusts (n 16) does not apply to trading trusts: § 1 comment b. The UTC applies to all express trusts: UTC s 102, and comment following.



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making authority.89 Or, to put the point the other way around, it should not be possible for a person to avoid civil liability for his or her wrongful actions, by a wholly private juridical structure. (4) Conceptual difficulties Moreover, in the context of the common law, some of these reforms may be more difficult to implement than first appears, because they arguably mix two different conceptual structures. The common law is not usually particularly complicated, and if trust creditors’ limited access to trust property seems convoluted and, to some, unjust, there is probably a reason. One reason is that the claims of creditors and of beneficiaries are not alike. The unsecured creditor, of course, has only a personal claim. In the common law trust, the beneficiary has more than just a personal claim on a special patrimony. His interest is in the nature of a real right that binds the trustee’s rights in the trust assets. A common law trust is a way of holding rights such that they are encumbered by the beneficiaries’ interests. The beneficiaries’ interests are sometimes subject to rights or powers of the trustee; and in the unreformed law, creditors can sometimes take the benefit of the rights or powers of the trustee, who is their debtor. The goal of the proposed reform is to allow unsecured creditors – at least, some of them – access to assets that are held for the beneficiary, without needing the assistance of the trustee in the form of the trustee’s right of indemnity. In other words, these creditors must be allowed to take those assets free of the pre-existing interest of the beneficiary. We have to notice that on its face, this is contrary to a fundamental element of the law of trusts. It was decided centuries ago that even a creditor in good faith who has given value for the claim he holds can never, in his own right, lay claim to trust property. A good faith purchaser for value of a legal interest (including a legal security interest) in the trust property, who lacked notice of the trust, can take his interest clear of the beneficiaries’ rights; but an unsecured creditor, even a trust creditor, is not a purchaser of any kind. If we merely 89 This reasoning is found in Aubry and Rau’s theory of the patrimony, as a justification for why a person’s patrimony must be indivisible and why every patrimony must be attached to a person; see Kasirer (n 8). It is also found in common law critiques of legislative interventions that allow for limitations of liability, in the context of trusts and otherwise; see R Flannigan, “The political path to limited liability in business trusts” (2006) 31 Advocates’ Q 257. For a detailed discussion of the advisability of allowing relatively unregulated trust forms to operate as limited liability business organisations, with reference to issues of governance and investor protection, see P Miller, “The future for business trusts” (2011) 36 Queen’s LJ 443.

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changed that rule, and started treating unsecured creditors as good faith purchasers of trust property, we would make all trust assets available to all good faith creditors of the trustee, including his personal creditors. This is why the reforms are couched in the language of capacity, hitherto unknown in the common law of trusts. And this, effectively, is the language of multiple patrimonies – also hitherto unknown in the common law of trusts. But one can wonder whether the common law’s understanding of the rights of beneficiaries can co-exist with the multiple patrimony theory. Would the acceptance of that theory, for the benefit of creditors, mean that the nature of the beneficiary’s interest would also necessarily change? Would it become, like the interest of an estate beneficiary or that of the beneficiary of a Scottish trust, merely a personal claim? Or, would the interest of trust creditors change, becoming more like a trust beneficiary’s interest? Let me give an example, that at least poses a puzzle. Take the case of a trustee who has improperly transferred the trust property, for no consideration, to a third party, whom we will call Tertius. In the common law, because Tertius cannot establish that he acquired a legal interest in the property in good faith, for value and without notice of any breach of trust, he becomes a trustee, whether or not he had any reason to be suspicious. This is because the beneficiaries’ interest encumbers the trustee’s rights, even when those rights are transferred to another. We usually call someone like Tertius a constructive trustee. Now imagine that before the unlawful transfer, there was an unsecured trust creditor, Quartus, who had a claim arising out of a contract properly entered into by the original trustee in the execution of the trust. Under the traditional common law approach, Quartus’ claim is simply a claim against the original trustee, who remains personally liable even though he has disposed of the trust assets. But under the UTC, the trustee is “not personally liable” to Quartus; Quartus can claim “against the trustee in the trustee’s fiduciary capacity”. But against which trustee can he so claim? He can clearly claim against the original trustee in his fiduciary capacity; but the original trustee no longer holds any assets in his fiduciary capacity. He may have some personal assets, but under the UTC Quartus cannot make the original trustee personally liable (we can assume that Quartus, being a simple creditor, has no claim in breach of trust). Tertius now holds the trust assets, on constructive trust, but it is not clear how Quartus can establish any claim against Tertius for the debt he is owed, either under the UTC or under the traditional common law approach. Under the UTC, Quartus should, however, be able to bring a claim in the nature of a fraudulent conveyance claim. This would, if successful, recon-



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stitute the trustee’s fiduciary capacity. Again underlining the similarities between the UTC approach and Scots law, this is exactly how Scots law would address the problem, although it would call Quartus’ claim a Paulian action.90 But here is the point: under Scots law, this is also how the trust beneficiaries would be required to proceed, by setting aside the disposition and reconstituting the trust patrimony.91 Since beneficiaries in that system are only a kind of creditor against the trust patrimony, they would probably not be able to show that Tertius is a constructive trustee.92 So one reading of the reform initiatives that, like the UTC, create a separate trust patrimony, is that not only creditors’ claims, but also beneficiaries’ claims, are to be reformed; beneficiaries’ claims will become personal claims, albeit against a special patrimony, and protected by the law of fraudulent conveyances. Can the reforms have it both ways? Can beneficiaries’ rights be both beneficial encumbrances on the rights held by trustees, inherently superior to the rights of creditors of the trustee, and personal claims against a trust patrimony, that are postponed as a matter of priority to the rights of trust creditors? It seems unlikely. And if the example involving Tertius and Quartus seems contrived, we need only consider the case of the original trustee who wishes to resign. In this variation, Tertius is not a constructive trustee but a newly appointed express trustee, and the transfer to Tertius is perfectly lawful. For Quartus, the problem is the same. When a new common law trustee is appointed, the trust property is transferred to him. But in general, liabilities cannot be transferred, at least not without the participation of the creditor by way of novation. The Scottish trust, like the common law of succession, may be able to contemplate universal succession to a patrimony, in which both the assets and the liabilities are transferred to a transferee, such as an executor or a new trustee.93 Outside of succession, the common law does not have such a theory, which is why trustee resignations typically involve indemnity contracts between the new and old trustees. But while such contracts can shift the ultimate economic burden, they cannot move a liability from the old trustee to the new one. Rights can be transferred, but liabilities generally cannot. 90 See Gretton, “Trusts without equity” (n 4) at 91. 91 Ibid; Scottish Law Commission, Discussion Paper on Liability of Trustees to Third Parties (Scot Law Com DP No 138, 2008) paras 2.27 and 2.32. 92 G L Gretton, “Constructive Trusts: I” (1997) 1 EdinLR 281; G L Gretton, “Constructive Trusts: II” (1997) 1 EdinLR 408. 93 See Gretton, “Trusts without equity” (n 4) at 106.

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Another reading of the reform initiatives is that creditors’ claims will be reformed in the direction of becoming rather like beneficiaries’ claims: they will be attached to trust assets, and travel with them into the hands of any transferee except a bona fide purchaser. Under the UTC, in the trustee resignation case, it seems clear that Quartus has no claim against the old trustee, who is not personally liable under the statute. The intention may be that Quartus’ claim lies against the new trustee, Tertius, even though Tertius and Quartus have never laid eyes on one another. This could work if the UTC reform means that the assignment of all of the trust assets by a resigning trustee carries with it a universal succession of the resigning trustee’s obligations as well; at least, those that he bears in his capacity as trustee. Perhaps it does mean this, when properly interpreted, although the idea of universal succession does not appear in the text. What if only some of the trust assets were transferred, or if all of them were transferred unlawfully, as in the original example? Here, there would be no room for the concept of universal succession, and if we wished to find that the transferee was liable to Quartus, it would have to be on a theory that creditors’ claims are, like beneficial interests, attached to the trust assets. It is not my intention to place theoretical objections in the path of a practical reform. But there is nothing so practical as a good theory.94 The common law’s floating charge follows exactly the conceptual structure of the common law trust; the crucial difference is that the interest of a chargee is by way of security, and not beneficial. But just like a beneficial trust interest, it is an encumbrance on another’s rights. We know that the floating charge does not travel well into Scots law.95 It is not clear that the multiple patrimonies of Scots law will travel easily into the common law of trusts. Although the estate of a deceased person in the common law may well be very like a Scottish trust, the common law trust is different in important ways. Reforms to fundamental legal institutions have to be made in a way that respects the characteristics of those institutions. There is nothing wrong, indeed there is everything right, in starting a reform project with policy analysis, and the recent trust work of the Scottish Law Commission is an excellent example of this. But as that work also shows, the implementation of the desired reform must pass from policy back through law, respecting its categories and established internal logic, or problems are sure to arise. 94 K Lewin, Field Theory in Social Science: Selected Theoretical Papers (1951) 169. 95 Sharp v Thomson 1995 SLT 837, reversed 1997 SC (HL) 66. See Scottish Law Commission, Report on Sharp v Thomson (Scot Law Com No 208, 2007).



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F. CONCLUSION Let me conclude with these final thoughts. When I read Scots Law into the Twenty-First Century: Essays in Honour of W A Wilson, I was struck by the number of references that the contributors made to Bill Wilson’s 1992 text entitled “The importance of analysis”.96 There seemed to be a consensus that this paper – indeed this title – captured some of the essence of his philosophy about the law, and his views on the vocation of the academic lawyer. It is a fascinating text, beginning with a careful disquisition on the folding of foolscap paper, and noting, in reference to a leading textbook’s discussion of an 1859 case in the law of contract, “The facts are incorrectly stated in the first eight editions.”97 The essay, it must be said, ends on a slightly negative note, suggesting that Scots law was in danger of losing touch with its civilian roots, and that “the law teachers are to blame”.98 But this is a message that has been taken as a call to action by Bill Wilson’s colleagues and successors – a call to proclaim, in word and in deed, in one’s writing and in the classroom, the importance of analysis; the importance of legal tradition, tied inextricably as it is to sound doctrinal solutions; and the importance of the academic lawyer in passing these values on to lawyers-in-training. It is because I have come, thanks to the lessons of my own teachers, to share these goals and these values, that I feel so deeply honoured to have been invited to give this lecture.

96 Wilson (n 39). 97 At 163. 98 At 171.

8  Translating Part of France’s Legal Heritage: Aubry and Rau on the Patrimoine* Nicholas Kasirer**

In a once important and now neglected book published in the 1950s, Germanborn art historian Nikolaus Pevsner sought to describe the “Englishness of English art” as part of a broader account of the geography of painting and sculpture. This was not, it would seem, undertaken as an exercise in identity politics or aesthetic nationalism – Pevsner used what his publisher called “the unbiased eye of a foreigner” to identify aspects of the seventeenth and eighteenth-century English character that found dominant and recurring expression in the visual arts. Quite apart from rather fantastical conclusions – the author contended that “practical sense, reason and tolerance” were for-reaching plastic themes in English art – Pevsner’s book stands as a bold signpost for scholars in other disciplines, such as law, where efforts to ally culture and political geography are ongoing intellectual pursuits.1 If jurists were to look not for the Englishness in English art but, say, the “Frenchness” in French law, how could they go about doing it in a meaningful way? There are some fine studies that undertake this kind of venture from the perspective of the social sciences, but the humanities and the arts – no less alive to law’s symbolic and persuasive attributes – are also deserving of attention when one situates law in culture and society.2 The Pevsner project is of special interest to the comparative lawyer who works to draw French law out of its hexagonal setting; it is of interest too   * This article was originally published in (2008) 38 RGD 453.   ** Dean and James McGill Professor of Law, Faculty of Law and Quebec Research Centre of Private and Comparative Law, McGill University. [Editor’s note: The Honourable Nicholas Kasirer is currently a judge at the Court of Appeal of Quebec.]   1 N Pevsner, The Englishness of English Art (1956) 206.    2 For a recent study of representations of justice and enactment in the law and the visual arts, see N Paquin, “Regards complémentaires”, in N Paquin (ed), Les signes de la justice et de la loi dans les arts (2008) 7.

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for legal translators who seek to transpose French legal writing out of its habitual language of expression. This paper offers a translation of a scholarly description of the patrimony in French law written by Charles Aubry (1803-1882) and Frédéric-Charles Rau (1803-1877) as a means of presenting one of the great texts of nineteenth-century French legal literature to a new audience. It proceeds on three assumptions about legal translation as a means of giving voice to some of the supposed Frenchness of French law. First, some of the substantive genius of French property law is trapped in this familiar text, and, until it is translated, that part of France’s legal heritage will be lost on some of those from outside trying to look in. Second, that part of the formal genius of French law – its style, its aesthetic – is also trapped in texts such as Aubry and Rau on the patrimony, and this formal dimension bears some of French law’s cultural and even normative colour. Lastly, that these formal and substantive messages can be drawn out of French and then cast – transposed, translated – into English, a language sufficiently elastic to convey the essential aspects of this Frenchness of French law, notwithstanding the associations of English with AngloAmerican law and that language’s apparent distance from French legal ideas. Translation studies – a burgeoning, humanities-based discipline taught in stray corners of comparative literature and linguistics departments  – provides an increasingly helpful theoretical framework for those who ­ endeavour to measure the relationship between law and culture through language and comparison.3 While legal translators’ eyes and ears are more generally trained on legislation and cases, the exercise of translating scholarship may in fact be more useful in eking out what makes French law different. Doctrine, at least as its status amongst the sources of law is understood doctrinally in France, is a secondary “authority” to be sure. The question of their formal role in law-in-the-making aside, texts of French scholarship are read as a rite of passage in the education of a French jurist, and the cultural setting for French law cannot be understood without some kind of encounter with the influential work of French law’s first-class citizens, often described generically as “the author”. These great texts can, as in the case of the work of Jean-Étienne-Marie Portalis, embody the stylistic model that shapes how the French understand how law should ideally sound.4 Elsewhere, the sub  3 See P Legrand, “Issues in the translatability of law”, in S Berman and M Woods (eds), Nation, Language and the Ethics of Translation (2005) 30.   4 See, for a translation of Portalis’ famous speech on codification, S Herman (transl), “Preliminary discourse” (1969) 43 Tulane LR 767 and, for a translation of his speech on the origins and



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stantive contribution to the law made by scholars – François Gény’s “free scientific research” is an example5 – is as important as enactment in pointing to what the French imagine law to be. The shape and voices of French legal scholarship direct us to ways of knowing law. Scholarly writing does more than simply show what the law is, as other sources are often content to do: instead it takes up the mission, at least implicitly, of defining an epistemic community. Nowhere is the command of scholarship over the French legal imagination plainer than in France’s celebrated work in the law of property – maybe the most abstract field in the high-church abstraction of French private law – written 150 years ago by two Alsatian law professors, Charles Aubry and Frédéric-Charles Rau. Their joint work on the patrimony is nothing if not one of the defining texts of French legal literature qua literature – it may be weak as a measure of positive law but every major work on French legal scholarship singles it out for comment.6 So fundamental is their theory of the patrimony to France’s legal heritage that without Aubry and Rau (according to one very brilliant study of their influence), French lawyers cannot today think about law at all.7 Translating the French legal canon, made up of scholarly works like Aubry and Rau, involves first recognising scholarship which, by reason of its style or originality, has marked the French way of knowing law. The challenge then, in parsing the French canon in English, is transposing it, with these marks intact, out of the language in which, for some, French law is forever bound up. Aubry and Rau on the patrimony offers these two challenges to the comparative lawyer and the legal translator. Charles Aubry and Fréderic-Charles Rau – fabled civilian “friends-inlaw”8 – seem like two characters out of a Flaubert novel as much as pillars

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nature of ownership, by the present author, “Portalis now”, in N Kasirer (ed), Le droit civil, avant tout un style? (2003) 1. See F Gény, Méthode d’interpretation et sources en droit privé positif: An English Translation, Jaro Mayda (transl), 2nd edn (1963), and, by the present author, “François Gény’s libre recherche scientifique as a guide for legal translation” (2001) 61 Louisiana LR 331. See, e.g., N Hakim, L’autorité de la doctrine civiliste française au XIXe siècle (2002), who devoted careful attention to Aubry and Rau through his book, observing that their influence grew substantially after their deaths and into the twentieth century (at 360). F Zenati, “Mise en perspectives de la théorie du patrimoine” (2003) 4 RTDCiv 667, where this leading expert on contemporary French property law contended that the theory of the patrimony made famous by Aubry and Rau (transl) “brought about a conceptual transformation in the law arising out of [the 1804] codification so profound that jurists are incapable of thinking without reference to it” (at 667). On the phenomenon of co-authorship, of which Aubry and Rau represent an example worthy of study, see T Weir, “Friendships in the law” (1991-1992) 6/7 Tul Civ LF 61.

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of the nineteenth-century French legal establishment.9 Born in the same year, both in profoundly Alsatian settings – one in Saverne, the other in Bouxwiller –, they spent a lifetime writing together in Strasbourg under the doctrinal raison sociale of “Aubry & Rau”. Their multiple-volume, manyeditioned Cours de droit civil français is their best-known work – is still in print, albeit in a new format and, of course, piloted by new editors respectful of what came before but writing in their own voices.10 It is the portion of this standard text devoted to the theory of the patrimony – “there are few pages in the literature of French law as famous as the passage of the treatise of Aubry and Rau devoted to the theory of the patrimony”11 – that deserve to be read by anyone who, even today, seeks to understand French law of property or, more generally, French legal culture.12 Their book has been called “the masterpiece of French legal science in the nineteenth century”13 and there are numerous examples of those who contend that pages on the patrimony set, in many respects, a high-water mark of the post-codification legal literature.14 They certainly represented a new way of writing about law in France – free from the formalistic, article-by-article codal commentary that dominated French scholarship until then – that gives the work special methodological significance.15 In their important book on French legal scholarship which stressed the role of scholars in shaping the French law, Philippe Jestaz and Christophe Jamin devoted substantial space to Aubry and Rau and, in particular, to the pages they wrote on the patrimony. They identified these two nineteenth-century authors as the first to write about the law in the Code civil as a “system”, based on “general theory”, as opposed to an

  9 Useful biographical material and an appraisal of their work was published following a colloquium on the bicentenary of their birth held in Strasbourg in 2003: J-F Weber, “Aubry et Rau, conseillers à la Cour de cassation”, in J-M Poughon (ed), Aubry et Rau. Leurs œuvres, leurs enseignement (2006) 12.  10 The most recent edition, apparently unfinished, is A Ponsard and I Fadlallah, Droit civil français. Aubry et Rau (1989).  11 J Ghestin and G Goubeau, Traité de droit civil: Introduction générale, 3rd edn (1990), para 198.  12 The translation is prepared from the 1873 edition: C Aubry and F-C Rau, Cours de droit civil français d’après la méthode de Zachariæ, 4th edn (1873) paras 573 ss. The French text may be consulted, in its original typeface, at the excellent Droit-Méthodes-Documents Wester-Ouisse website at http://droit.wester.ouisse.free.fr/pages/brocantes/aubry_rau_patrimoine.htm.  13 J-L Halpérin, Histoire du droit privé français depuis 1804 (1996) 65 (transl).  14 In this sense, one might argue that the last contribution of Aubry and Rau is to the ways and means that French law is represented in scholarship as much as to the law itself. For a suggestion of this, see P Dubouchet, La pensée juridique avant et après le Code civil, 4th edn (1998) 178.  15 See the critical appraisal of this view in A Sériaux, “Heurs et malheurs de l’esprit de système: la théorie du patrimoine d’Aubry et Rau” (2007) 32 RRJ 89.



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ensemble of articles deserving of successive exegetical study.16 Aubry and Rau on the patrimony is universally seen as a canonical text in the literature. There is something perverse in this. First, Aubry and Rau wrote rather badly. Their marathon run-on sentences champion truth over clarity, setting standards along the way of how not to use the virgule for Grevisse. “It is Chinese”, said one leading French author who obviously sees this characterisation as the ultimate measure of the unintelligible in law, if not worse.17 It would seem that they were so preoccupied with precision of thought for the conceptual finery of the patrimony that, in the words of another great French law professor, their work was “à peine accessible aux aspirants au doctorat”.18 Labouring over their travails, one feels that they wrote à quatre mains, comme un pied, to mix redactional metaphors. Second, the text is not, strictly speaking, original French – the first edition of their book started as a translation, or at least an adaptation, from German.19 Zachariæ had written in that language on the fundamentals of French law and, while subsequent editions left the German text rather far behind, some of the cadence of the original remained through this process of linguistic appropriation.20 Indeed it is certainly strange to think of the archetypical French text on property, so celebrated as a perfect depiction of the French legal mind, as itself a linguistically derivative text. Third, while the powerful influence of these few pages cannot be denied, the prevailing view today is that the theory of the patrimony has failed to explain what Aubry and Rau set out to prove, and  16 P Jestaz and C Jamin, La doctrine (2004) 80 ss. They contended that Aubry and Rau’s theory of the patrimony is a compelling example, notwithstanding its practical failings, of the scholarly ability to cast law as general theory, (transl) “implicitly having the same binding force as enactment or decided cases of the Plenary Assembly of the Court of Cassation” (at 231).  17 Philippe Malaurie wrote that Aubry and Rau are much less read today by reason of the technical and abstract character of their prose. “C’est du chinois”, he said: P Malaurie, Anthologie de la pensée juridique, 2nd edn (2001) 184.  18 “The learned Cours de droit civil français by Aubry and Rau, is barely accessible to doctoral students” (transl): F Gény, “L’évolution contemporaine de la pensée juridique dans la doctrine française”, in Le droit privé français au milieu du XXe siècle. Etudes offertes à Georges Ripert, t 1 (1950) 3.  19 C Aubry and F-C Rau, Cours de droit civil français, traduit de l’allemand, de M CS Zachariæ (1837). It was only for the third edition, published between 1856 and 1865, that the authors asserted in their title that the book was no longer a translation but an adaptation of the thought of Zachariæ (i.e. “d’après l’ouvrage allemand de CS Zachariæ”). By the fourth edition – the one preferred here – the authors adapted the method rather than the German itself (i.e. “d’après la méthode de Zachariæ”). Malaurie, who pointed to the fourth edition as the one in which the authors left their most personal imprint, described the process of appropriation of the German as (transl) “a rare instance of a phenomenon of acculturation in our law”: Malaurie, Anthologie (n 17) 182.  20 C Bocquet, “Traduction juridique et appropriation par le traducteur. L’affaire Zachariæ, Aubry et Rau”, in GREJUT (eds), Legal Translation. History, Theory/ies and Practice (2000) 15 at 20 ss.

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may in fact explain nothing.21 There are so many exceptions to their theory of the patrimony, centred as it is on the legal person, that one recent author decried it as irrelevant to positive law.22 Finally, while the book triumphed at a time and in a spirit of exegetical commentary on the Code, this passage on the patrimony owes little to enactment and in fact presented a theory that had only a fragile textual foundation.23 All in all, Aubry and Rau are far from obvious poster boys for the French scholarly tradition in private law. And yet a statue was erected in their honour in a park in Strasbourg.24 How many law professors can claim that? What follows this commentary is a translation of a most modest portion – twenty-some short pages – of their massive Cours de droit civil français that remains, 150 years after their death, a touchstone in French legal writing. As a transposition of a dated and often cumbersome literary work, the resulting English text presents many of the recurring problems faced by those who must decide to what extent the awkwardness of an original text should find its way into the translation.25 Aubry and Rau should be encountered in good English, of course, but not in better English than they wrote in French. They  21 There are, nevertheless, still some ardent believers in the explanatory powers of the theory and of the relevance of Aubry and Rau: see, e.g., F Cohet-Cordey, “La valeur explicative de la théorie du patrimoine en droit positif français” (1996) 4 RTDCiv 819.  22 See the compelling case made for the abandonment of the theory of the patrimony on the premise that, as a framework for explaining property and obligation, it is “useless” in practical terms: D Hiez, Étude critique de la notion de patrimoine en droit privé actuel (2003). But why does the author of this superbly researched thesis leave out, by his own design (No 12), the fiducie/trust? This would have helped make his case (as the patrimony of Aubry and Rau cannot accommodate fiduciary ownership in the English sense). Moreover the trust also contains the seeds of the patrimony’s salvation in the patrimoine d’affectation/patrimony by appropriation: see P Lepaulle, “An outsider’s view point of the nature of trusts” (1928) 14 Cornell LQ 52.  23 See F Zenati (n 7) at n 6, and accompanying text, who argued that this absence of textual foundation for their argument means that Aubry and Rau are best thought of as “moderns” and not as “classical” scholars in that they understood positive law as residing outside the codal texts.  24 At the unveiling of the statue, emotion in the Strasbourg community of property lawyers ran high: see E Gaudemet, “Aubry & Rau: Discours prononcé à l’Université de Strasbourg le 21 novembre 1922, à l’occasion de l’inauguration du Monument Aubry & Rau” (1923) RTDCiv 65. Gaudemet took pains to describe the affective side of the relationship between the authors that produced “the most perfect book ever inspired by the science of the civil law in France” (at 66) and noted, with effusive admiration, that the style of the portion of the book on the patrimony was marked by an “elegance, in the sense that mathematicians use the term” (at 94). Quizzically, Gaudemet made special mention, not fully explained, of the authors’ diverging religious practices as a source of “a double portrait made fully of mutual sympathies and antitheses” (at 74) (transl).  25 See the comment to this effect in one major translation of Aubry and Rau prepared by the Louisiana State Law Institute: “the translator [soon to be renowned civilian property expert A N Yiannopoulous] has refrained from taking liberties with the original text merely for the purpose of enhancing readability”. J Denson Smith, “Foreword”, in Cours de droit civil français by C Aubry and C Rau: An English Translation, vol IV (1965) at IV.



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wrote, too, in the language of the civil law, which suggests that the civil law in English is the right jurilinguistic mode and proper lexicon to be used for the translation.26 The choice of words will ring exotic to English-speaking jurists for whom the common law vocabulary – those “words and phrases judicially considered”, as the terminology of English law is often described – provides the most familiar lexicon for private law. Civilians working in English – in Quebec, but elsewhere, including, for our lexical purposes, Scotland and Louisiana – draw the fundamental vocabulary of private law from a fund of words that articulate the “common law” (droit commun), including words that come, variously, from enactment (including codes where they exist), scholarship, ancient practice and, occasionally, the courts.27 But even then choices are sometimes difficult – patrimoine, for example, has various meanings in law – it may allude to wealth generally,28 or successoral wealth in particular,29 to heritage in a generic30 or even genetic31 sense, and to a mass of property that falls short of the civilian notion of a universality.32 In choosing the word “patrimony”, I have done more than rely on the usage anointed – unevenly – in the Civil Code of Québec,33 a most useful source of French-English translation for civilians.34 The English term  26 I have in many cases relied on P-A Crépeau, P P C Haanappel, N Kasirer, and R P Kouri, Private Law Dictionary and Bilingual Lexicons, 2nd edn (1991).  27 See J E C Brierley, “Les langues du Code civil du Québec”, in P-A Côté (ed), Le nouveau Code civil: interprétation et application. Les Journées Maximillien-Caron 1992 (1993) 129 at 138 ss.  28 Portalis used the term patrimoine in this common sense, in his discourse on ownership, to refer simply to wealth or the assets of a person: see Herman (n 4) at 24.  29 The term patrimoine/patrimony is sometimes used to refer to an “estate” when, technically speaking, the legal person to which the universality of rights and obligations adheres is no longer present to assure that assets answer for liabilities, except by way of the successoral principle that death immediately seizes the living of the patrimony of the deceased (le mort saisit le vif). Compare W de M Marler, The Law of Real Property – Quebec, edn by G C Marler (1932) para 360 (who avoided the term “patrimony”), and J E C Brierley and R A Macdonald (eds), Quebec Civil Law (1993) para 335 (where the term is embraced).  30 As in the expressions patrimoine commun de l’humanité/common heritage of mankind, used in public international law or in the Loi sur le ministère du Patrimoine canadien/Department of Canadian Heritage Act, SC 1995, c 11 in the law of the Canadian public administration.  31 On the idea of a patrimoine génétique as the object of legal regulation, see M-J Bernardi, “Diversité génétique humaine: éléments d’une politique” (2001) 35 RJT 327 at 387.  32 As in the case of the patrimoine familial/family patrimony at arts 414 ff CCQ, which refers to the net value of a mass of designated property, held by spouses in marriage or civil union, but where assets do not answer for liabilities.  33 Breaking with its predecessor, the Civil Code of Lower Canada, and with the French Code civil, the Civil Code of Québec, SQ 1991, c 64 consecrates explicitly the patrimoine/patrimony as a foundational structure of knowledge for the civil law in observing, in the prominent art 2(1) of the Code, that “Toute personne est titulaire d’un patrimoine / Every person has a patrimony”.  34 Whatever the practical circumstances of its preparation, however, the English text of the Civil Code of Québec is not to be considered a translation if that is understood as conferring upon it

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had long ago emerged as a standard through usage outside of the civil codes in Quebec.35 This was necessarily so as the term occupied so small a place in the Code civil des Français, as Aubry and Rau pointed out, which formed the basis of both the French and English terminological choices in this regard in the Civil Code of Lower Canada.36 It is important to observe that for all the prominence that the Civil Code of Québec affords to the theory of the patrimony and the patrimony by appropriation, neither concept is defined there, which gives the work of Aubry and Rau (except on matters of the appropriation and division of patrimonies) heightened relevance.37 There is nothing modest about the scholarly ambitions of Aubry and Rau’s text: the pages they devoted to the theory of the patrimony are not just the foundation for their work on successions, it is also the moral and philosophical anchor of the whole of theory of property (les biens). Arguably the patrimony has been a more solid and lasting conceptual basis than ownership itself (la propriété) which, since its renewed articulation as article 544 of the French Code civil, has suffered assaults on its theoretically absolute character, and inroads into its Romanist materiality. Ownership does indeed organise the law of real rights into a perfect architecture of dismemberments and modalities, but however important it is as an organising construct for the law, it hardly speaks meaningfully to a world of wealth held in mutual funds and commercial paper.38 The patrimony, on the other hand, organises all rights (as opposed to things) having financial value – real, personal and intelleca status less authoritative than that of a notionally original text. The Supreme Court of Canada has affirmed that the English text enjoys equal authoritative status, as a matter of Canadian constitutional law, with the French text: see Doré v Verdun (City) [1997] 2 SCR 862.  35 The currency of the term in civilian scholarship is well established as the one seen as appropriate to express the theory of the patrimoine formulated by Aubry and Rau (although not everyone seems to think it translatable, including leading comparative expert B Nicholas, French Law of Contract (1982) 29, where the French term is left in italics and explained, with some of the moral flavour drained out of it, as a “balance sheet”). Jurists with Quebec training are at peace with the pairing patrimoine/patrimony: see, e.g., C B Gray, “Patrimony” (1981) 22 C de D 81, especially at 101 ff Gray followed a grammatically correct usage in not using the definitive article “the” in his paper on “patrimony”. Idiomatically, civilian usage appears to prefer “the patrimony”, perhaps under the sway of the French-language le patrimoine. I am grateful to Aileen Doetsch for our discussion of this point.  36 J E C Brierley, “Quebec civil law codification viewed and reviewed” (1968) 14 McGill LJ 521 at 535 ff.  37 It bears mentioning that the theory of the patrimony of Aubry and Rau was explicitly cited as one of the inspirations of art 2 CCQ by the Minister of Justice responsible for presenting the Civil Code to the Quebec Parliament in 1991: Commentaires du ministre de la Justice: le Code civil du Quebec, t 1 (1993) 5.  38 See M McAuley, “The architecture of entitlements” (1996) 3 Trusts & Trustees 4, who argued that the civilian challenge to the trust was not fiduciary ownership – a “red herring” he rightly said – but a way for the patrimony to accommodate it.



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tual – around the natural, legal, political and moral ideal of the “person”. It then draws them into a relationship with that person’s financial obligations so that assets answer for liabilities as a moral postulate that makes capitalism in the liberal political tradition possible. The concept allowed for the assertion of the centrality of the human person, which emerged historically on the strength of property law and obligations, as a defining theme in modern civilian thought39 and remains a living dimension of the civil law as it adapts to changing political and cultural circumstances around the world.40 The patrimony also defines itself by establishing its own negative space as extrapatrimonial rights.41 By excluding (and thereby identifying a contrario) a person’s rights and obligations that do not have economic value, be they the right to privacy, the right to vote, the alimentary obligation, or the right to life, the theory of the patrimony in fact takes on a pivotal role in describing virtually the whole range of droits subjectifs or legal rights known to private law in the French tradition. The advent of a sophisticated understanding of extrapatrimonial rights extending to what is today called “personality rights” is recent in French law: what is surprising in reading Aubry and Rau, and indeed a tribute to the incisiveness of their text, is that they foresaw the idea of extrapatrimonial right by reference to what they described as “innate property”. These biens innés are not property in the conventional sense – they are not amenable of value in exchange and are generally not susceptible of exchange at all. A person can alienate the content of his or her patrimony at will, subject only to the obligation not to defraud creditors. But he or she cannot alienate innate property. The right to privacy, the right to integrity of the person and indeed the right to the patrimony itself, to name just these, are extrapatrimonially bound up in the person’s very existence. As a matter of substantive law, the patrimony is presented by Aubry and Rau as an abstraction – a notional container, held individually by every person, distinct from what it may or may not contain – that organises itself  39 See the explanation of how “the centrality of the person and the growth of rights” is part of property in civil law tradition in H P Glenn, Legal Traditions of the World, 3rd edn (2007) 141. Professor Glenn emphasised ownership in his account of the civil law tradition, although obliquely he points to the patrimony in discussing the place of the trust in civilian thought.  40 See, e.g., D Lametti, “General concepts of private law relating to private property in the Civil Code of the Russian Federation and the Civil Code of Québec” (2005) 30 R Central & East European L 7.  41 For a fine overview of the distinction between patrimonial and extrapatrimonial rights which evinces a particularly careful use of language, see E Reiter, “Personality and patrimony: comparative perspectives on the right to one’s image” (2002) 76 Tulane LR 673.

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and the rights and obligations it contains as a “universality of law”.42 On this basis, “patrimonial rights” (droits patrimoniaux) are synonymous with “property” (biens) when those rights are appropriated by a person. All legal persons have one, and only one, patrimony, whether or not they hold rights or obligations (and thus, again, the right to a patrimony is not itself property but an inalienable extrapatrimonial right, like the right to life itself); the patrimony is indivisible as a universality of law (although its composite parts can be divided up, even into “universalities of fact” in respect of which assets do not necessarily answer for liabilities). The connection between the person and the patrimony as a legal universality has been one of the unshakeable truths of French private law for which the Aubry and Rau remains the touchstone account.43 It is the personality of the holder that gives the patrimony its vocation in legal life which is itself an affectation: the appropriation to the purpose of serving the legal person to whom it is attached.44 Aubry and Rau tolerate no other patrimony by appropriation (patrimoine d’affectation) except that tied to the person, which earned them the disdain of those who hungered for a more dynamic law of property in France. To detach the patrimony from the person and this fundamental vocation could only be achieved, on their view, at the expense of the interests of creditors. Assets within the universality of law, imagined as a fund, are subject to real subrogation and answer for obligations, present and future, that a person might take on. This centrality of the person is reasserted again at the confluence of the law of property, obligations, and persons, expressed prosaically in the idea that the property of a debtor forms the common pledge of his or her creditors. Sometimes called  42 Very often the definition of a universality of law is closely tied to that of the patrimony, suggesting to some that the second might in fact be the only true example of the first. For a fine example of such a definition, see G Cornu (ed), Vocabulaire juridique (1998) 860 (“Universalité 1”). Aubry and Rau took a different view: see translation, infra, § 574.  43 In its expression of the view that the patrimony forms a whole that is necessarily connected to the person, “the theory of the patrimony finds its most sublime expression” (transl): G Cornu, Droit civil. Les biens, 13th edn (2007), para 5. But their account has never been accepted uncritically, notably from early twentieth-century objections raised by René Demogue on the connection between the person and this universality: see, in this respect, C Kuhn, Le patrimoine fiduciaire. Contribution à l’étude de l’universalité (thesis) (2003). I am grateful to an anonymous reviewer of the Revue générale de droit for bringing this reference to my attention.  44 It should be noted that most experts do not explain the patrimony tied to the person as having an explicit appropriation, although it most certainly does. Art 2(2) CCQ provides that “[t]he patrimony may be divided or appropriated to a purpose, but only to the extent provided by law”. This is a further purpose or appropriation, other than the purpose of serving the person who, by reason of paragraph (1), has a patrimony. In this standard case, the patrimony is thereby appropriated to the purpose of serving the person as titulary. That is its affectation.



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the “subjectivist” theory of private law, it was found to be “congenial”, as one scholar has brilliantly explained, for the useful brand of economic liberalism it promised rather more than for its coherence or the truth it stood for.45 Aubry and Rau’s patrimony held out the universal transmission of a person’s property, without regard to its origin, upon death; it advanced unlimited individual liability of individual debtors; it built a model for holding property that was most plainly based on the human person as the paradigmatic holder of rights. That all of these were riddled with exceptions is less important than the moral posture struck by the authors: the theory of the patrimony of Aubry and Rau was, above all things, a product of the “dogma of the individual will, a dogma that explains law through subjectivity”.46 It is indeed this centrality of the person to the theory of the patrimony, much more than Romanist ownership, that sets the common law and the civil law so far apart in respect of the trust as a fundamental structure of legal knowledge.47 To be sure, Romanist ownership cannot fathom the magic of Equity and its division of title between legal and equitable owners. But it is the indivisibility of the patrimony, and its necessary connection to the person, that precludes the separation of management and enjoyment of property so that each of the trustee and the beneficiary has patrimonial real rights in the res of the trust. As long as the dogma of Aubry and Rau held, the English trust, in the fullest sense, was not possible in the French civil law tradition without undermining the moral postulate of individual responsibility for debts at the expense of creditors. The long struggle for civilians to have “trusts without equity”48 or “trusts as patrimonies by appropriation”49 required not a reconfiguration of title or of Romanist real rights, but an acceptance that the patrimony could be split in two (as in Scotland) or appropriated to a purpose other than a person (as in Quebec) for a civilian

 45 R A Macdonald, “Reconceiving the symbols of property: universalities, interests and other heresies” (1994) 39 McGill LJ 761 at 771.  46 Zenati (n 7) at 671 (transl).  47 Two leading texts make plain the necessity to adapt the theory of the patrimony in order to accommodate a dynamic trust in the conceptual language of the civil law, citing Aubry and Rau as the point of departure of their analysis: see J Beaulne, Droit des fiducies (1998) paras 36 ff, and J Claxton, Studies on the Quebec Law of Trust (2005) paras 1.65 ff.  48 On the impact of the trust in Scotland on the patrimony, see G L Gretton, “Trusts without equity”, Ch 5 above.  49 For an account of how Quebec law accommodated the trust through the patrimony by appropriation, see J E C Brierley, “The new Quebec law of trusts: the adaptation of common law thought to civil law concepts”, in H P Glenn (ed), Droit québécois et droit français: communauté, autonomie, concordance (1992) 383.

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trust to exist.50 But in both of these cases, the patrimony as an emanation of the person is defeated.51 Somewhere in Strasbourg, two former patrimonies are spinning in their scholarly graves. France has introduced, at article 2011 of the Code civil, a limited-purpose fiducie in 2007, but this was done in the most hesitant and “timid” fashion.52 The French trust is a far cry from the foundational legal idea that the trust represents for English law – it is an “opération” (the word itself, so uncharacteristic for the droit commun, is a reminder of the exceptional character of a reform that had to struggle with general principle in order to be recognised).53 A very narrow patrimony by appropriation is now consecrated in France, but the protections provided by Aubry and Rau’s link between patrimonies and persons are assured by other means, all of which limits the scope of the fiducie. Because it refuses to give up on the theory of the patrimony as the general rule, the French trust certainly fails to extend the scope of powers accorded to the trustee as legal owner in the common law, and does not try to conjure up a jurisdiction in Equity or a conscience for the court to limit the trustee’s behaviour.54 Less bold than the Scots and Quebec initiatives which were nevertheless cited as inspiration by the artisans of the French trust, the new rules end by asserting, perversely, the higher importance of the Aubry and Rau view of the patrimony as the general principle to which art 2011 is only an exception. Like Maitland’s causes of action, Aubry and Rau continue in some measure to rule the French law of property from their graves. Do other legal traditions know Aubry and Rau’s patrimony, such that it  50 There is an argument advanced by some that the effect of the detachment of the patrimony from the person is to redefine patrimonial rights completely. See, for a balanced discussion of the different views, Y Emerich, La propriété des créances: approche comparative (2007) paras 532 ff.  51 One of the most original efforts to save the foundations of the subjectivist theory in the face of the patrimony without a person as its titulary has been developed by Madeleine Cantin Cumyn who has argued for the recognition of the patrimony by appropriation as a subject of law (sujet de droit). See M Cantin Cumyn, “La fiducie, un nouveau sujet de droit?”, in J Beaulne (ed), Mélanges Ernest-Caparros (2002) 129.  52 François Barrière observed upon the enactment of the Loi No 2007-211 of Feb 19, 2007 (JO Feb 21 at 3052), that it took fifteen years before “timidement” the trust was received into the Code civil: F Barrière, “La fiducie”, D 2007, No 20 at 1346.  53 See P Marini, “Enfin une fiducie à la française!”, D 2007, No 20 at 1347, in which the senator who piloted the French legislation to enactment takes pains to explain (with italics for the untranslatable and unnameable) that “la fiducie est donc proche du trust anglo-saxon dans ses effets, mais s’en distingue dans sa substance”.   54 See P Matthews, “The French fiducie: and now for something completely different” (2007) 21 Trust Law International 17 at 24, who explicitly cites Aubry and Rau’s theory of the patrimony as the reason France will not have a true trust, and the absence of that theory as a condition precedent to English law having one.



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might not express much of any presumptive Frenchness of French law? Many of the ideas and functions of the patrimony would be recognisable to a common law expert. Certainly there is a long-standing habit of thinking of the trust as a fund, susceptible of a sort of real subrogation, and of certain qualities a civilian would associate with the patrimony.55 But the idea of a universality of law, attached to a person and extending to all rights and obligations of economic value, itself indivisible, is hard to square with a tradition where regimes for seizure, tracing, bankruptcy and insolvency, and inheritance of real property, to name just these, make for a sort of patchwork of rules and exceptions which cannot do the work of the general theory – a veritable “system” as it has been called – of Aubry and Rau’s patrimony. Just as it is hard to imagine the droit subjectif as having any a priori existence in English law, it is hard to argue that the patrimony exists as a purely intellectual concept tying together property, persons and obligations in the common law.56 This abstract character of the patrimony is the key to identifying the importance of Aubry and Rau in French legal culture. By reason of the role that their theory plays in the law of property and persons, it stands as one of the best exemplars of the methodology of abstract rationality that characterises French legal thinking. Aubry and Rau is, in some measure, the beginning of any understanding of French law, and it is not surprising that French law students start their studies here, as successive editions of various Introduction au droit books demonstrate.57 It is not so much the style of Aubry and Rau, or the substance of their theory, but it is the baldly abstract character of their presentation – as incorporeal in some ways as the patrimony itself – that expresses what is so characteristically French about the text. What part of the great genius of French law rests in this penchant for abstraction of which Aubry and Rau is such a telling exemplar? It is certainly a convenient quality for outsiders to fix on as they try to find the path of the  55 See the imaginative argument advanced by L Smith, “Trust and patrimony”, Ch 3 above. Sometimes a functional argument is presented: the trust may not be a patrimony in the French sense but this is of no consequence because a patrimony is “unnecessary”: P Matthews, “From obligation to property, and back again? The future of the non-charitable purpose trust”, in D J Hayton (ed), Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (2002) 203 at 215. I am grateful to Lionel Smith for our discussion of this point.  56 On the significant absence of the droit subjectif in the common law, see G Samuel, “Le droit subjectif and English Law” (1987) 46 CLJ 264. I am grateful to Professor Samuel for our discussion of this point.  57 On the mischievous influence of these books upon free thought in France, see C Mouly, “Crise des introductions au droit” (1986) Droits 109. Virtually all these standard texts currently in print record, in very similar hagiographic language, the central place of Aubry and Rau’s theory of the patrimony in private law.

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law in France. Abstraction takes the law out of the courts and into the library by allowing the French to lift their law out of the messy Anglo-American judicial world of fact that is the common law’s grand laboratory. The French lawyer seems to look down at social ordering from a high rational perch of the patrimony where droits subjectifs tower over human experience in the national understanding of the juridique. The taste for abstraction that would champion the patrimony explains much more than the primacy of rights in French legal culture. The reliance on abstract rationality provides both a mode of reasoning and a theory of justice where fairness is measured by bloodless comparisons between the rights held by different titularies, rather than the impact of those rights on their lived lives. Abstraction also points to the overwhelming consensus that French law’s dominant aesthetic is one of order. It explains the contented sense that law is best stated in disembodied enactment before it is discovered through experience. It accounts for the French law students’ lust for formalism in law. It helps an outsider understand the supreme disinterest in earthy custom as an account of legal normativity. Abstract legal reasoning generates a lexicon for legal discourse drawn from the table of contents of the Code civil rather than from another’s words and phrases, et encore, et encore. Abstraction as practised so well by the likes of Aubry and Rau is the principal plaything of French law’s professorate, whose lifeless but often profoundly beautiful expositions of the law – legal scholarship as “still life”! – dominate the French legal imagination, arguably as much as does the Code itself. The theory of the patrimony is essential reading to understand how the French jurist imagines the law of property, and Aubry and Rau’s texts on the patrimony are the French doors through which the scholarly tradition of abstract rationality can best be understood. The glass in these patrimonial doors is now very opaque – they are not really right on the substance of the law, and the formal virtues of the text are slender. But with some effort one can see not only French property law, but some of what makes France an epistemic community for law, with categories of thought, structures of legal knowledge and a way of speaking about law that evinces something different. So unequivocally French, this once-­ translated Germanic text, now translated again, can be henceforth appropriated by English-speaking readers to new purposes, like the patrimony itself. It might even encourage them to place new trust in French legal ideas. Author’s note: Previous versions of this text were presented at the colloquium “Terminologie et modèles propriétaires au XXIe siècle” at McGill University and at the annual meeting of the American Society of Comparative Law at



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Cornell Law School. I am grateful to Jean-Guy Belley and Yaell Emerich of McGill as well as Annelise Riles and Mitchel Lasser of Cornell for those invitations. Thanks to Aileen Doetsch, Edmund Coates and Michael McAuley for their critical readings of the translation and to Sophie AudetteChapdelaine and Régine Tremblay for research assistance. ANNEX [Translator’s note: what follows is a translation of excerpts of Charles Aubry (1803-1882) and Frédéric-Charles Rau (1803-1877), Cours de droit civil français d’après la méthode de Zachariæ, 4th edn, t 6, Paris, Imp et lib générale de jurisprudence Marchal et Billard, 1873, bearing on the patrimony taken from the portion of that work on successions. The internal references are to those referred to by the authors, in the original citation form and in keeping with the abbreviations established there. This translation forms part of the paper “Translating part of France’s legal heritage: Aubry and Rau on the Patrimoine”. Translation was prepared by Nicholas Kasirer. The translator acknowledges with thanks the critical comments of Aileen Doetsch, Edmund Coates and Michael McAuley. © Nicholas Kasirer.] OF RIGHT BEARING ON EXTERNAL OBJECTS, CONSIDERED AS ELEMENTS OF A PERSON’S PATRIMONY I. OF THE PATRIMONY IN GENERAL1 INTRODUCTION § 573. Primary Notions as to the Patrimony2 The patrimony is the whole of the property of a person, imagined as forming a universality of law.   1 The Redactors of the Code did not assemble the general rules relating to the patrimony in a single chapter. The rules which will be examined in this first section are scattered throughout the Code. It should also be observed that the word patrimony is used in the Code on very rare occasions. The term is only found in the provisions dealing with the separation of patrimonies. See arts 878, 881 and 2221. As a rule, the aggregate of the property of a person, considered as forming a juridical whole, is designated in the Code by the expressions the property, rights and actions; or all the property; or simply the property. See arts 724, 2092 and 2093. The term bona was used in Roman Law in this same sense. See L. 3, D. de bon. poss. (37.1); L. 83 and L. 208, D. of V. S. (50, 16).  2 The propositions found in the present paragraph elaborate on those already considered at § 162.

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(1) The idea of the patrimony deduces itself directly from that of personality. However varied the objects upon which man may have rights to exercise and however diverse they may be in their essential natures, when viewed as the subject of the rights of a determinate person, these objects are all under the free choice of one and the same will, the deployment of one and the same legal power. They constitute, by this very fact, a juridical whole (universum jus). By nature purely of the intellect, the patrimony is necessarily composed of elements clothed with the same character. The external objects upon which the rights of a person bear are not parts integrating within the patrimony in and of themselves or by reason of their essential nature. Rather, they are part of the patrimony in relation to their status as property, and in relation to the utility they are susceptible of procuring.3 As such, these objects all reduce to the common idea of pecuniary value.4 (2) As a matter of pure theory, the patrimony is made up of all property, without distinction, including, in particular, innate property5 and future property.6 French Law accorded itself with this theory in treating future property as virtually part of the patrimony, even before the property enters the patrimony as a matter of fact as articles 1270, 2092, 2122 and 2123 clearly indicate. Yet French Law distanced itself from the theory with regard to innate property. Even while it considers actions arising out of harm to innate property to be parts integrating within the patrimony, our Law does not include within it innate property in and of itself so long as it has not suffered any harm.7  3 Naturaliter bona ex eo dicuntur quod beant. Beare est prodesse. L. 49, D. de V. S. (50, 16).   4 In the language of Roman Law, the same term pecunia designated at once money coined of precious metal (pecunia numerata) and all the property in general which makes up the patrimony. Quum pecuniæ significatione ad ea referuntur, quæ in patrimonio sunt. L. 5, præ D. of V. S. (50, 16). See also, L. 178, eod, tit.   5 It is from this point of view that the action in damages for wrongful interference with innate property can be justified rationally. Zachariæ, Manuel de droit français, § 373, note 1; and Quarante livres sur l’État, III, p. 221, text and note 182.   6 The patrimony is, in its most exalted expression, the very personality of man considered in its relations with exterior objects upon which he has or will have rights to exercise. The patrimony encompasses not only property already acquired in actâ, but also property to be acquired in potentiâ. This is aptly expressed in the German word Vermögen, which means at once capacity and patrimony. A person’s patrimony is his juridical authority, considered in absolute terms, free from any limits in time and space.   7 The expressions property, rights and actions; and all the property; and the property which one encounters at arts. 724, 2092 and 2093 plainly do not encompass innate property. The



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There is more. According to our Code, rights to exercise authority considered independently of whatever pecuniary advantages may be attached to them are not to be seen as forming part of the patrimony.8 (3) Viewed as an aggregate of property or of pecuniary values, the patrimony gives definitive expression to the idea that property represents such value. In order to determine the content of the patrimony, liabilities must absolutely be deducted from assets.9 However, a situation where the liabilities exceeded the assets would not cause the patrimony’s existence to cease: it encompasses the debts just as it encompasses the property.10 (4) Given that the patrimony is at once an emanation of legal personality and the expression of a person’s legal prerogatives, it follows therefrom: That only physical and legal persons can have a patrimony;11 That all persons necessarily have a patrimony, even if, at any given moment, they possess no property; That any one person can have only one patrimony, in the essential sense of the term. § 574. Of the Unity and Indivisibility of the Patrimony – Of Universalities of Law that can be distinguished from the Patrimony (1) Like legal personality itself, the patrimony is, in principle, one and indivisible. This is true not only from the perspective indicated at the end of the preceding paragraph, that the same person can only have one patrimony. It is also true in the sense that the patrimony of a person is not divisible into material or quantitative parts because of its incorporeal nature and that, by reason of the unity of the person, the patrimony is not even susceptible of division into several universalities of law, distinct from one another. As to this last however, our Old Law was to the contrary, in matters of intestate Redactors of the Code appear to have proceeded from the idea that such property is priceless and thus must be excluded from the patrimony because it is not, in itself and a priori, susceptible of pecuniary evaluation, and may only occasion such an evaluation where it has sustained some harm and, then, only in the amount of such harm.   8 Rights to exercise authority are not part of the patrimony in Roman Law either. See L. 5 præ., D. de V. S. (50, 16); Law of the Twelve Tables, tab. V. frag. 3.  9 Bona intelliguntur cujusque, quæ deducto œre alieno supersunt. L. 3, D. de V. S. (50, 16). See also L. 88, D. eod, tit.  10 Nam, sive solvendo sunt bona, sive non sunt, sive damnum habent, sive lucrum, in hoc loco proprie bona appellabuntur. L. 3, præ., D. de bon. poss. (37, 1).   11 It is for this reason that slaves, deprived of personality, did not have a patrimony in Roman Law, but only a peculium. Paterfamilias liber peculium habere non potest, quemadmodum nec servus bona. L. 182, D. de V. S. (50, 16).

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s­ uccession, testamentary gifts and even gifts inter vivos, considering movables, acquests and private property there as distinct universalities of law within the same patrimony.12 But article 732 now precludes this kind of division of the patrimony, having abolished all distinctions between movables, acquests and private property, even in matters of the law of succession. According to Zachariæ, whose scholarly opinion we have adhered to in the past, a person’s patrimony may be divided into an immovable patrimony, encompassing the entirety of his immovables, and a movable patrimony, enclosing the entirety of his movable property. This distinction would have certain practical advantages in Zachariæ’s view, in the field of privileges and hypothecs, in community of property between spouses, and in respect of dispositions of property by gratuitous title.13 But it is an affront to reason that the patrimony, whose elements are purely of the intellect, could be open to a division which would rest upon the physical attributes of the objects which it happens to encompass. Moreover, whatever practical advantage arises out of this kind of division is more apparent than real. Turning first to matters relating to privileges and hypothecs, it is clear that while certain privileges extend to all movable property, and while legal and judicial hypothecs can be exercised against all immovables, these rights of preference bear far less upon distinct juridical universalities within the patrimony of a debtor than upon each and every one of the specific movables and immovables which belong to him, according to the qualities according to nature and the legal characteristics that distinguish them from one another. The same observation may be made regarding the matrimonial regime of the community of property. Movables and immovables are divided up – movables in the common mass, immovables excluded therefrom – based on particular qualities which distinguish them from one another rather than on their abstract character as property.14  12 See Pothier, Des donations entre vifs, sect. III, art. 1, § 2.  13 See Zachariæ, Manuel de droit civil français, § 574, text and note 2.  14 It would be pointless to argue for the contrary position, that movable debts also fall into the common mass, since it is as property that movables are considered part of the community pursuant to the rule Bona non sunt, nisi deducto œre alieno. Art. 1409, 1º. Indeed, if this rule had been taken as a guide for the liquidation of liabilities of the community, these liabilities would include all debts, both immovable and movable, in proportion to the comparative value of the movables against that of the immovables. By limiting community property to movable debts and excluding immovable ones, the legislator did not follow the latter rule strictly. The legislator simply proceeded from the idea that liabilities must be treated in the same way as assets, as directed by the rules of equity. Proof beyond question of this is that debts, even movable debts, do not fall into the community except, and even then only with compensation, when they



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In the final analysis, article 1110 is the only provision of our Code where a trace of the division of the patrimony into two juridical universalities – one movable, the other immovable – remains. This article directs that a legacy, be it of all immovables, of all movables or even of a fixed portion of immovables or movables, is a legacy by general title.15 (2) Although the patrimony is, in principle, one and indivisible, our Law nevertheless recognises the existence of certain other universalities of law that must be distinguished from it. It is thus that the property within a succession is, in some respects, separated from the patrimony of the heir due to the benefit of inventory or separation of patrimonies even though the property remains, in reality, part of the heir’s patrimony.16 It is again thus, in the cases provided for by articles 351, 352, 747 and 766, that property which certain persons are called upon to receive back from a succession forms a universality of law distinct from the complex of movables and acquests in the succession. In the same way, property held by an absentee at the time of his disappearance or the time he was last heard from constitutes, after a court order to take provisional possession, a universality distinct from the patrimony of the absentee and, after the order to take absolute possession, a universality distinct from the ­patrimony of the person taking possession.17 And, finally, in many respects, property ­encompassed within a mass fixed inalienably to the line of those who succeed to a title of nobility or encompassed within a fideicommissum by ­general or by universal title forms a universality of law, distinct from the ­patrimony of the titulary of that mass18 or fideicommissum,19 as the case may be. relate to immovables that are private property of the spouses. One must interpret article 1414 in the same way, which in no way contradicts our position. As Pothier, from whence this article of the Code was taken, explains so well (De la communauté, no 267), this does not represent an exception to the rule at article 1409, no 1, it is rather just a repetition of the final provision, of that subdivision of the article, according to which compensation is due to the community for movable debts relating to immovables which are private property.  15 Article 1110 was borrowed from Pothier (Des donations testamentaires, chap. III, sect. I, § 2), who taught that all property of a given species (genera subalterna), contained in the general universality of property of a person, also forms a universality of property. This explanation, worthless in the eye of reason, might, to some extent, have been valid under the rules of our Old Law, which saw movables, acquests and private property, within one and the same person’s patrimony, as each constituting distinct universalities of law. But, today, the characterization of a legacy consisting of all ones movables or of all ones immovables as a legacy by general title is an oddity and cannot be justified as a matter of legal theory.  16 See art. 802, § 618; arts. 878 to 882, and § 619. Zachariæ, § 573, text no 1, in fine.  17 See in respect of the right of return, § 608. See in respect of the property relinquished by the absentee, §§ 152 and 157.  18 Comp. Decree of March 1, 1808, arts. 40 et seq., and § 695; Zachariæ, § 573, text and note 4.  19 See L. 70, § 7, D. de leg., 2º (31); arts. 1048 et seq., and § 698.

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(3) It may be observed, as a final matter, that while the patrimony, being an incorporeal entity, is not divisible into material or quantitative parts, it can nevertheless be divided, as an aggregate of property, into intellectual parts or fractional shares. This division takes place in particular in the case of a legacy by general title bearing upon an aliquot share of a succession. See article 1110. § 575. Of the Fungibility of the Elements of the Patrimony – Of Real Subrogation (1) Through their quality as property, the elements which make up the patrimony may all be reduced to the common idea of pecuniary value. It is precisely this last which clothes them, in regard to each other, with the character of fungible things. It is this character that both explains and justifies the theory that damages are payable for non-performance of an obligation to do requiring the debtor’s personal intervention. It also explains and justifies why compensation is due for loss caused by delict or quasi-delict.20 The same may be said of the action de in rem verso, which will be addressed below in § 578, and of real subrogation, to which we will devote the remainder of this paragraph.21 (2) Taken in its broadest sense, real subrogation is a ­fiction ­according to which one object replaces another so that it becomes the ­property  of the  person who owned the first object and is clothed with that object’s ­juridical nature.22 This fiction is justified, as we have just said, by the fungibility of objects within a given universality of law. Whatever their diverse origins may be, these objects are susceptible of replacing one another. Where an act resulting respectively in the alienation and acquisition of property causes an object to leave a universality of law, it stands to reason that the alienated object be replaced, as an element forming part of this universality, by the object so acquired. The rule In judiciis universalibus, pretium succedit loco rei, et res loci pretii gives expression to this idea.23  20 Comp. art. 1142 and § 299, text, lett. c; arts. 1382 and 1383, and § 443 et seq.  21 On this subject, see Renusson, Traité des propres, chap. I, sect. x, and Traité de la subrogation, chap. I, nos 3 and 4; Rép., of Merlin, see Subrogation of things; De la subrogation réelle, by Flach, Paris, 1870, broch. in-8.  22 Subrogation is real when it operates from thing to thing. It is so designated to distinguish it from personal subrogation which operates from person to person. See § 321. Demolombe mistakenly attributes to us the view that personal subrogation operates in the instance provided for in article 747. We do not see, and we have never seen in it anything but a real subrogation.  23 The scholars within our Old Law generally recognised this rule, justifying their view on Law 70, § 7, and on Law 71, D. de leg., 20 (31). Louet, lett. S, Som, X. Henrys, II, liv. IV, chap. VI, quest.



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It follows from the rule that, at the time the universality of law is delivered-over or returned, the one to whom this must be made will always then have the right to require the handing over of the object that replaced the object which left the universality. Whether he is also obliged to content himself with the object acquired as a replacement for the alienated object, or whether he is permitted to claim either the object itself or its value in damages, as the case may be, depends on the circumstances. These circumstances include, in particular, the good or bad faith of the person upon whom rests the obligation to return or deliver-over and of third persons in favour of whom the alienation was granted.24 By virtue of the subrogation, the subrogated object assumes not only as a matter of fact the place, within the universality, which was occupied by the object to which it is substituted, but is also clothed, as an element of this universality, with the object’s juridical nature. Subrogatum sapit naturam subrogati.25 28, no 8. Brillon, Dictionnaire des arrêts, III, see Subrogation, nos 43 and 43 bis. Renusson, De la subrogation, chap. 1, nos 3 and 4. Here are the texts of these two laws which appear indeed to consecrate the principle of real subrogation: Quum autem rogatus, quidquid ex heriditate supererit, post mortem suam restituere, de pretio rerum venditarum alias comparat, deminuisse, quæ vendidit non videtur. – Sed quod inde comparatum est, vice permutati dominii restitueretur. The author of the entry Subrogation of things in the Rép. of Merlin sought however to demonstrate the contrary position. According to this author, the laws directed simply that the fideicommissary was to be considered to be as rich as if he had not sold, and ends up bound to give satisfaction for the value of the things he alienated. And, in support of his opinion, he cited the Law 72, D. de leg., 2º, which follows those previously cited, as well as Law 25, § 1, D. de hered. pet. (5, 3). But the first of these, according to which the fideicommissary who paid his own creditors out of the proceeds of sale is bound to restore this value, serves to confirm rather than contradict the principle of subrogation. As to the argument based on the Law 25, § 1, D. de hered. pet. which stipulates “Item si rem distraxit, et ex pretio aliam rem comparavit, veniet pretium in petitionem hereditatis, non res, quam in patrimonium suum convertit”, it is more specious, but not at all convincing. If this Law, which begins by recognising the subrogation of the price to the thing, does not also recognise the subrogation of the thing to the price, it must be based on the assumption that this thing has indeed entered the patrimony rather than the succession of the person who held it, as had been the case under Law 20, § 1, D. eod. tit. where, in situations in which the acquisition was of no use to the succession, the heir had no interest in claiming the thing purchased in the place and stead of the thing alienated. Moreover, whatever one’s views of the state of Roman Law on point, the rule set forth in the text must nevertheless be considered as justified in theory and consistent with tradition. While our Code did not reproduce the rule as a general matter, it does however include various provisions which are only applications of the rule and which presuppose the rule’s existence. See arts. 132, 747, 766, 1697. Zachariæ, § 573, text no 3.  24 We will content ourselves with referring the reader, for the applications of these propositions, to the subject-matters of absence, the assignment of successoral rights, of the petition of heirship, and of the separation of patrimonies. See art. 132, and § 157; art. 1697, and § 359 ter, no 1; § 616, text no 3, lett. a, and text no 5; § 619, text no 3.  25 Particularly in this respect, the system of the property termed private had given rise to an extensive development of real subrogation under our Old Law. The maxim quoted in the text

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Subrogation assumes, in fact, that the origin and identity of the object claimed, by virtue of its operation, to be an element of this or that universality, will duly be established.26 On the other hand, subrogation being just a fiction based on the fungibility of the elements which make up one and the same universality of law, it can only but operate between two objects, one of which having replaced the other as an element of this sort of universality, being claimed pursuant to a judicium universale. If, to the contrary, the issue is one of the exercise of an action bearing on one or more particular things, taken in and of themselves, rather than an action bearing on a universality of law or on the elements that compose it, then the prior noted fiction would lack f­oundation and ­subrogation by the sole operation of law will not occur. In judiciis ­singularibus, pretium non succedit loco rei, nec res loco pretii.27 The same would hold with respect to objects which are part of a universality of fact (universum corpus), such as a library, a herd or the stock-intrade of a business.28 While the scholars within our Old Law rejected in principle that real subrogation would operate in the case of a judicium singulare, they taught, however, that this principle could find an exception by virtue of a law or an agreement. This sort of exception is encountered frequently according to our present Law, with respect to community of property between spouses and the dotal regime.29 continues to enjoy numerous applications today. We have already noted the examples of investment and re-investment in community of property between spouses and in the dotal regime. See § 507, text no 3, lett. c; § 543, text no 3. We will note others below when we deal with the successoral return and fideicommissary substitutions. See § 608, text no 2; § 696, text no 2, lett. c.  26 This proposition will be elaborated upon at § 608, text no 2 and § 619, text no 3 relating to the successoral return and the separation of patrimonies. See the exception indicated in the text and note 11, infra.  27 This is plainly established by numerous texts of Roman Law. “Nummus ergo qui redactus est ex pretio rei furtivæ, non est furtivus.” L. 48, § 7, D. de furtis (47, 2). “Si ex ea pecunia, quam deposueras, is, apud quem collocata fuerat, sibi possessiones comparavit, ipsique traditæ sunt, tibi vel omnes tradi, vel quasdam compensationis causa, ab invito eo in te transferri, injuriosum est.” L. 6, C. de rei vind. (3, 32). See also: L. 4, C. com. utriusque jud. (3, 38); L. 8, C. si quis alt. vel sibi (4, 50); L. 12, C. de jur dot. (5, 12). This also reflects the teachings of the scholars within our Old Law cited at note 4, supra, and Zachariæ, § 573, text and note 55.  28 Given that such universalities are made up only of objects similar in their essential nature, it is impossible to apply the rule Pretium succedit loco rei to them. And if, in actuality, a given book were to enter a library collection as another leaves it for example, as a result of an exchange, this is not to say, merely on this basis, that the first will be subrogated to the second, since it enters the library far less as replacing of the other, than as, by its very nature, and by the purpose given to it by the owner, an integrating part of the same universality of fact.   29 The masses of private property of each of the spouses do not form, under the community



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It is for this reason, among others, that under article 1407, an immovable acquired in exchange for the immovable of one of the spouses, that was held as private property, does not come under the community as an acquest. Instead it is subrogated, by the sole operation of law, as private property, to the immovable that has been alienated. Also, the immovable received in exchange for a dotal immovable is also characterised as dotal, according to article 1559. It is thus as well that an immovable acquired when the community applies, by re-investing the funds generated from the alienation of private property of one of the spouses, remains private, on condition that the act of acquisition records that the immovable was acquired as a reinvestment, and that the reinvestment be accepted by the married woman where the immovable that was alienated was her private property. It is not, however, necessary that the funds which acquitted the acquisition itself be the very ones which were paid into the community as the price of the property sold.30 Articles 1434 and 1435. Lastly, we also mention, as an exceptional case of real subrogation, that provided by the last paragraph of article 1558. The excess proceeds of sale of a dotal immovable which has been alienated to meet the needs of the spouses remains dotal property, once those needs have been met, just as do the immovables acquired as a re-investment of this excess. Beyond the exceptional circumstances where, contrary to the rule In judiciis singularibus, pretium non succedit loco rei, nec res loco pretii, a of property regime, juridical universalities distinct from the spouses’ respective patrimonies. Similarly, the patrimony of the married woman under the dotal regime is not divided into two universalities of law, one made up of dotal property, the other made up of paraphernal property. Contrary to Zachariæ’s mistaken suggestions (§ 573, text in fine), there could thus be no question that subrogation in matters of private property or dotal property, is an application of the rule In judiciis universalibus, pretium succedit loco rei, et res loco pretii. It represents instead a true exception to the rule which works in the inverse direction. The provisions of law which enshrine or allow for subrogation with respect to subject matters of this type appear to have been introduced into our Old Law as a generalisation and approbation of marriage covenants relating to the investment of monies that were private or dotal property brought into the marriage, or again as re-investment of the proceeds of alienation, of immovables that were private or dotal property undertaken during the marriage. The Redactors of the Code were correct in following the past traditions in this respect which are perfectly justified from a practical point of view.  30 See § 507, text no 3, lett. c, and note 61. The latter proposition set forth in the text represents a significant exception to the established rule, text and note 7, supra. This exception was permitted to facilitate re-investment, which could seldom take place, and would thus only have been of a most limited usefulness, had it been subject to the condition that the funds used to acquit the price of replacement property as acquired in re-investment be the very ones from the alienation of the private property sold.

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law itself establishes real subrogation or at least authorises it under certain conditions, this fiction must be rejected as lacking all rational and legislative foundation.31 OF THE PATRIMONY CONSIDERED AS THE SUBJECT OF RIGHTS § 576. Of Real Rights which may bear upon the Patrimony The patrimony, as a universality of property, is founded on legal personality, yet it is distinct from the person himself. It is possible therefore to conceive the existence of a relationship between the person and the patrimony. This relationship is the same one that is established between a person and any object belonging to that person. It is a right of ownership. The right of ownership is the only real right which may bear upon the patrimony, during the lifetime of the person to whom the patrimony belongs.32 The patrimony can be neither subject to the right of usufruct or of use, nor can it be subject to privileges or hypothecs.33 It is true that a person may come to be the holder of a right of usufruct bearing on all the property in the patrimony of another person. It is in this manner that a father’s or mother’s legal enjoyment extends, as a general rule, to all the property of his or her children. It is in the same manner as well that a person may be called upon by will to exercise a right of usufruct on all of the property left by the testator. But, in circumstances of this sort, the enjoyment or the usufruct bears far less on the patrimony as a universality of property but instead on the objects taken individually that are encompassed within it. As well a legatee, in usufruct only, of all or an aliquot share of the property of a person should not be considered to be a universal legatee or  31 Renusson, op. et loc. cit., Zachariæ, § 573, text and note 5. Bordeaux, 20 May 1830, Sir., 30, 2, 248. Comp. Angers, 13 March 1867, Sir., 68, 2, 273. Zachariæ errs in saying that (loc. cit.), the decisions of the Court of Cassation and the Court of Grenoble cited in note 10 of §283 are rendered in application of the proposition set forth in the text. In the event that fire strikes a hypothecated building, the hypothecary creditors have no right of preference to exercise on the indemnity paid by the insurer. Yet this is far less by virtue of the rule In judiciis singularibus, pretium non succedit loco rei, as it is due to the equivalence of the indemnity to the premiums paid by the insured and not to the price of the immovable struck by fire.  32 At his death, it becomes the object of a right of succession. See §§ 582 and 583.  33 The aggregate of the property of a person amounts to a universality of law only because that aggregate might be said to be confounded with his personality. During the lifetime of the person, the very essence of the patrimony is such as to preclude that it be considered as forming the object of a real right held by a third person. Comp. however Zachariæ, §579.



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a legatee by general title, for is he not, in truth, merely a successor by particular title.34 The same observation applies to privileges or hypothecs bearing on either all the movables or on all the immovables in a patrimony, all the more that the aggregate of the movables or the aggregate of the immovables do not constitute universalities of law distinct from the patrimony which encompasses them. As for the right of pledge established by article 2092 in favour of the creditors and bearing on all the property of their debtor, it is not a real right. This pledge can only be exercised on the determinate objects which come under the patrimony, even though it appropriates the patrimony in itself.35 § 577. Of the Nature of the Right of Ownership that belongs to Every Person in respect of his Patrimony The right of ownership that every person enjoys over his patrimony is itself also called patrimony. We use the term in this paragraph in this sense here except where otherwise indicated. (1) A person does not acquire his patrimony. It is his innate property in that it is part of his very personality. Its existence does not depend on whether or not he actually holds property.36 Individuals who have no property or who only possess a small amount are called indigents. Indigents enjoy a number of exemptions as a consequence of their status, or certain privileges,37 notably that of judicial assistance.38 (2) The patrimony is inalienable. The very idea of the alienation of the patrimony is nonsensical given that it has no freestanding and autonomous  34 Proudhon, De l’usufruit, II, 475 and 476. See § 175; § 232, text and note 5; § 621 bis, text nos 1 and 2, notes 11, 14 and 22; § 714, text no 3, notes 16 and 17.  35 See the justification and detailed exposition of these propositions at § 579.  36 Zachariæ, § 575, text in fine.  37 See the Law of 14 Brumaire 14 year V, and the Code of Criminal Procedure, art. 420; Order of 13 Frimaire year IX; Decision of the Conseil d’État of 13-20 March 1810; the Law of 3 July 1846 (income budget) art. 8; Law of 10-27 November and 10 December 1850 having the purpose of facilitating the marriage of indigents, the legitimation of their children, and the withdrawal of these children confided to hospices; Decision of the Minister of Finance and Directive of the Commission of 3 September and 3 November 1861, Sir. 62, 2, 184. See also the Law of 4 June 1853, on the composition of juries, art. 5.   38 Law of 29 November, 7 December 1850 and 22 January 1851 on judicial assistance. Comp. study of this law by Doublet, Revue pratique, 1852, XIII, p. 481, XIV, pp. 63 and 299. By reason of diplomatic convention, the benefit of judicial assistance was successively extended to the Swiss (decree of 19 October 1869), to the Italians (decree of 29 February 1870), to the Bavarians (decree of 7 May 1870), and to the Belgians (decree of 8 June 1870).

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existence. The patrimony cannot therefore be conceived in isolation from the person to whom it belongs.39 The principle of the inalienability of the patrimony, so incontrovertible from a theoretical point of view, has been implicitly enshrined by our Civil Code. Quite apart from their basis as a matter of morality or political economy, the provisions of this Code which render without effect inter vivos dispositions of one’s rights as to an unopened succession find their legal justification in the inalienability of the patrimony.40 In actual fact, the new legislation is in keeping with the principles of our Old Law, in that it allows one to dispose in a marriage contract, by universal and by general title, of future property or of present and future property.41 But this is merely an exception originating in the favour always shown to marriage contracts in France.42 One of the consequences of the principle of inalienability of the patrimony is that even when an inter vivos gift might extend to all present property of the donor, it nonetheless bears only on objects taken individually. Accordingly, the donee is not bound, of right, to pay the debts of the donor because he is merely a successor by particular title.43 (3) Just as a person may not, during his lifetime, voluntarily abandon his patrimony, neither may he be deprived of his patrimony against his will. The patrimony is lost only when a person loses his legal personality, at the time he loses life itself.44 The loss of the patrimony itself is one matter, the loss of property contained in a patrimony, understood as a universality of law, is quite another.  39 Demolombe, XX, 455. Zachariæ, §576, text no 3.  40 See arts. 791, 1130 and 160; § 344, text and notes 13 to 22. Zachariæ, § [576], text no 3 in fine.  41 See arts. 1082 to 1085 and 1093; §§ 739 to 742.  42 The provisions of the Code relating to universal partnerships in general, and in particular, to community of property between spouses, in no way contradict the principle of inalienability of the patrimony. By establishing a universal partnership, one in no way alienates one’s patrimony. Zachariæ, § 576, note 2, in fine. 43 See § 706 for the explanation of this proposition. 44 Pursuant to the legislation in force prior to the Law of 31 May 1854, civil death constrained, within very narrow limits, the capacity of the person civilly dead, and caused him to lose ownership over the property he held at the time it was pronounced. But it did not deprive him of his personality nor did it deprive him, by extension, of his patrimony, which is envisaged as an incorporeal entity distinct from that property. Comp. § 82, text and note 2, text no 3, lett. b. See for an opposing view: Zachariæ, §578, text in principio. Furthermore, the general confiscation of property, for which the Penal Code of 1810 provided ample authority, did not bring about the loss of patrimony. This confiscation was abolished by article 66 of the Charter of 1814, the relevant provision being reproduced in article 57 of the Charter of 1830. The edition of the Penal Code promulgated in 1832 harmonised provisions of this Code with corresponding changes introduced in the legislation.



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This property may be lost either by the effect of the extinction of the rights bearing on determined objects, without any compensation, or else when the objects upon which the rights bear perish, as they might by reason of a fortuitous event or superior force.45 We refer the reader, here, to the paragraphs treating the matter of extinction of different kinds of rights that man may have on things or against persons,46 and to the explanations of the rule Res perit domino47 and the exceptions to that rule.48 We would add, nevertheless, to the exceptions already indicated, those found in articles 410 and 429 of the Code of Commerce.49 (4) Understood as forming the object of a right of ownership, the patrimony is absolutely indivisible. Different in this respect from the patrimony considered as a universality of law, the patrimony envisaged as the object of ownership is not even susceptible of being divided into intellectual parts or fractional shares. The rule in Roman Law, Nemo pro parte testatus pro parte intestatus decedere potest, is founded upon the indivisibility of the ­patrimony. If this rule has not been adopted in French Law, it is solely because the deceased is, ipso jure, represented in all respects, both actively and passively, by his intestate heirs, even when those heirs find themselves competing against universal legatees or legatees by general title.50 Moreover, in the paragraphs that follow, we shall have the opportunity to indicate some important consequences flowing from the indivisibility of the patrimony, considered as an object of the right of ownership and of the right as to a succession in our present legislation. § 578. Of Prerogatives Inherent to the Right of Ownership that Every Person enjoys in respect of his Patrimony, Considered as a Universality of Property This right of ownership notionally comprises the following prerogatives: (1) The prerogative to administer the patrimony, that is to say to ­undertake 45 46 47 48 49

Zachariæ, § 578, text and note 2. See principally §§ 220, 234, 255, 292 and 293, 314 et seq., 549, text no 4. See arts. 1148, 1302, 1810, 1827, 1893, 1929; § 308, text no 3, and § 331. See arts. 1302, 1379, 1807, 1822, 1881 and 1882, 1929; § 308, text no 3. Can this exception be extended by analogy? If, for example, in the case of fire, a house were to be demolished as a safety measure to prevent the spread of flames to neighbouring houses, would the owners of saved houses be bound to compensate the owner of the house that was destroyed? A negative answer appears to us to be indisputable. See in this sense: Toullier, XI, 180; Merlin, Rép., see Fire, § 2, no 11. Zachariæ (§ 578, text and note 3) is mistaken where he attributes the opposing view to Merlin. 50 Zachariæ, § 575, text in medio.

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all measures and accomplish all juridical acts that endeavour to preserve or increase the patrimony or take any advantage that the patrimony might procure.51 (2) The prerogative to collect the income of the patrimony. This income is considered to be an inherent part of the patrimony that produces it. This reflects the rule Fructus augent hereditatem. Set down in numerous texts of Roman Law,52 this rule also finds expression in the Civil Code.53 With the exception of the petition of heirship, specifically regulated by article 138,54 the rule must be respected in the other situations where one is to determine all that is comprised by a succession. It would seem to us that the rule applies in particular to the separation of patrimonies, the action for the partition of a succession, and to the remittance of a legacy by universal or general title.55 (3) The prerogative to dispose of the whole or an aliquot share of the patrimony by will.56 51 The Civil Code often makes use of the expressions right to administer, acts of administration, acts of pure administration without, however, indicating the precise ambit of this right or of these acts, either by way of a general definition or through specific provisions of the Code. Comp. arts. 125, 450, 481, 482, 1428, 1449, 1536, 1578 and 1998. The definition that is found in the text, however vague, is the only one possible for the right to administer and for the acts of administration. Moreover, the question as to whether any given act be classified in the category of acts of administration cannot be resolved in a general or absolute sense. The classification only occurs secundum subjectam materiam. A judge who faces this kind of question must never lose sight of the variety of circumstances in which, according to the spirit of the law, different persons find themselves charged with the right to administer the patrimony of others by the Code. The judge must also keep in mind those circumstances in which the Code only provides persons with the right to administer their own patrimony, while prohibiting them from exercising the power to dispose of it. Comp. § 113, text and note 1; § 123, text and note 28; § 132; § 153; § 412; §510; § 516, text no 7; § 531, text no 2; § 535, text no 1. Zachariæ, § 576, text and note 1. 52 See L. 20, § 3, L. 40, § 1. D. de hered. pet. (5. 3); L. 11, D. fam. ercisc. (10, 2); L. 178, § 1, D. of V. S. (50, 16); L. 2. C. de hered. pet. (3, 31); LL. 9 and 17. C. fam. ercisc. (3, 36). 53 See arts. 1005 and 1697. Article 138, by placing the possessor of a succession on the same footing as the possessor of a particular thing, and recognising for the former, as articles 549 and 550 recognise for the latter, the right to appropriate fruits collected in good faith, seems to have rejected one of the consequences of this rule. But it would not be justified to conclude that the legislature intended to abolish it completely. Rightly interpreted, article 138 must be considered instead as an exception to the provision of the Law 28, D. de hered. pet. (5, 3): “Omne lucrum auferendum esse, tam bonæ fidei possessori quam prædoni, dicendum est” rather than as a derogation from the rule Fructus augent herditatem. 54 See § 158, text and note 10; § 618, text no 3, lett. e. 55 See §619, text no 3, notes 18 and 19; §624, text no 3 and note 23; § 719, text and note 1; § 720, text and note 4. Req. rej., 9 November 1831, Sir., 32, 1, 5. 56 By inter vivos act, on the other hand, one cannot generally dispose of objects except when taken individually. See on this rule and on the exception recognised in connection with the marriage contract: § 577, text no 2, notes 5 to 7.



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(4) The prerogative to claim the restitution of objects or things to value that belong to the patrimony by way of personal action that may be characterised as an action de in rem verso.57 The action de in rem verso, for which only particular applications are found in the Civil Code,58 must be understood generally as a sanction of the rule of equity that directs that it is prohibited to enrich oneself at the expense of another.59 This rule applies in all cases where the patrimony of a person is enriched, without legitimate cause, to the detriment of the patrimony of another person, and where the latter has no action, arising either out of contract, quasi-contract, delict or quasi-delict, to secure what is his or what is owed to him.60 Where one patrimony has been depleted to the benefit of another, the action de in rem verso seeks to obtain the restitution of the object itself in circumstances in which no obstacle of fact or of law prevents restitution in kind. Alternatively, restitution is made in value as a substitute for the object. To determine this value, one must, in principle and in the absence of a legal provision to the contrary,61 calculate the amount from the time of the introduction of the action de in rem verso and not from the moment at which the obligation of restitution arose. Unlike the action negotiorum gestorum contraria, the action de in rem verso is generally only available up to the amount of what remains of the enrichment in the defendant’s patrimony at the time of the introduction of proceedings.62 Moreover, according to its foundational principles, the action de in rem verso is independent of the capacity or incapacity of the person against whom it is directed.63 (5) The prerogative to revendicate the patrimony. Given that a person cannot be deprived of his patrimony except when he 57 This action shares only its name with the action de in rem verso of Roman Law. Comp. § 4, Inst. quod cum eo contr. (4, 7): L. 1, prœ., D. de in rem verso (15, 3); L. 7, § 1, C. quod cum eo contr. (4, 26). This latter action is adjectitiæ qualitatis, and draws its force from the principal action to which it is attached, whereas the former action exists independently, without the requirement of any other action for support. Comp. Zachariæ, § 576, text and note 4. Zachariæ is wrong in suggesting that the action de in rem verso is a sort of real action. As such the action would be precluded for corporeal movables that still exist in kind by reason of article. 2279. 58 See arts. 548, 554, 555, 556, 570 and 571, 594, 1241, 1312, 1437, 1864 and 1926. 59 Jure nature æquum est neminem cum alterius detrimento et injuriâ locupletiorem fieri. L. 206, D. de R. J. (50, 17). 60 Comp. § 441, text no 2, and notes 15 to 17; Zachariæ, § 576, text in fine. 61 See arts. 554, 555 para. 2, 556, 570, 571 and 574. 62 Comp. Zachariæ, § 576, text and note 5. 63 Arts. 1241, 1312, 1926 and arg. of these articles. Comp. § 335, text and note 21; § 411, text and note 10; § 482, text no 3 and note 23; Zachariæ, § 576, text in fine.

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loses, at death, his very personality, the action in revendication cannot, in principle, be thought of as bearing upon the patrimony of the person taking such an action.64 However, the action afforded the absentee after the court order to take definitive possession of property under article 132, does in fact constitute a sort of action in revendication of the patrimony and should be considered like a universal action.65 Leaving this latter case aside, the action in revendication of the patrimony is unthinkable except as it bears on the patrimony of a deceased person, and that the action be taken by that person’s heir. The action is thus called a petition of heirship. II. OF THE PATRIMONY CONSIDERED AS SUBJECT OF OBLIGATIONS § 579. Of the right of Pledge to which the Patrimony is subject Because the patrimony is an emanation of legal personality, the obligations imposed on a person naturally burden his patrimony. This principle, which our Old Law expressed in the maxim Qui s’oblige, oblige le sien [(transl) He who obliges himself, obliges that which is his], was enshrined in article 2092 in the following terms: “Whosoever obliges himself personally charges, for the performance of that undertaking, all of his property, moveable and immoveable, present and future”. Article 2092 thus establishes a right of pledge, in favour of creditors, on the debtor’s patrimony itself as well as each and every item of property in the patrimony. Yet because patrimony is in itself inalienable, it can no more be subject to a forced expropriation than to a voluntary alienation. Accordingly, this right of pledge can only be exercised on the elements that make up the patrimony even if the pledge is said to bear upon the patrimony itself. Consequently, the means of enforcing this right of pledge – the right to seize property, the faculty to exercise the rights and actions of the debtor and the Paulian action – can only bear on specific items of property. The right of pledge is indivisible, like the patrimony to which it applies. Accordingly, creditors of a person who has disposed of some of his property 64 Zachariæ, § 576, text no 5. 65 Comp. § 157, text and notes 6 to 10; Zachariæ, § 576, note 3.



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nevertheless retain the right to seize the whole of what remains in his patrimony for what is due to them. And while it may be indivisible, the pledge established by article 2092 does not amount to a real right. This is made plain by the fact that the pledge is only exercised on the property of the debtor as such, that is to say the elements of his patrimony, and that it necessarily disappears in respect of the objects which have ceased to be part of this patrimony.66 § 580. Of the Equal Rank of Creditors in the Exercise of the Right of Pledge – Of the Insolvency of the Debtor The indivisibility of the right of pledge established by article 2092 has, as a corollary, the principle that all the property that makes up a person’s patrimony is uniformly charged, in a like manner, for the performance of all his obligations. This is true whatever the date at which the obligations arose and irrespective of the date at which the property was acquired. Earlier creditors have no preference over later ones, no more than the later creditors can claim precedence over the ones who came before in respect of property that was not yet in the debtor’s patrimony at the time he had earlier obliged himself to them. Because all of the various creditors of any one person have equal rights over the property in the debtor’s patrimony subject to the pledge, accordingly, where the proceeds of sale of this property are insufficient to pay the debts in full, these proceeds are divided up between the creditors rateably, unless one or another of them has special grounds for preference that they might claim, apart from the general right of pledge of which we are speaking here. Article 2093. Insolvency is the term used to describe the circumstances of the debtor, who is not a merchant, for whom liabilities exceed assets and who accordingly finds himself in a situation where he is unable to fully satisfy his creditors.67

66 Comp. Zachariæ, § 580, note 1. See for an opposing view: Lafontaine, Revue critique, 1859, XV, p. 359, no XI. The honourable magistrate did not appear to have understood the philosophical basis that definitively counters his position, and read article 2092 as though it said that the debtor is obliged to fulfil his undertaking not only on his present and future property, but also on his past property. He also forgot that there is no right to follow movables by hypothec and that immovables are only subject to a right to follow if a hypothec is registered against them. Finally, he did not consider that, in his system, the Paulian action would be of no use. 67 Coutume de Paris, art. 180. Coutume d’Orléans, art. 449. Colmet de Santerre, V bis, I. Demolombe, XXV, 666 and 667. Zachariæ, § 582, text and note 1. Comp. however Des obligations, II, art. 1168, no 5. This author does not specifically define insolvency, saying that it refers to the circumstances of a non-merchant who has stopped payments. See on insolvency, Dissertation, by Breynat; Revue de législation, 1846, III, p. 173.

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One should not confuse insolvency with bankruptcy, that is to say the circumstances of a debtor who is a merchant who has stopped making payments.68 […] § 581. Of the Consequences of the Right of Pledge as it Affects the Debtor’s Person By charging the patrimony with the fulfilment of the debtor’s obligations, the legislator naturally sought to shield the debtor’s person from legal proceedings taken by his creditors. The performance of duties connected to rights to exercise authority may be enforced by means of a coercive action again the physical person.69 By contrast, obligations which correspond to personal rights strictly speaking only charge, as a general rule, the patrimony of he who is subject to them. Consequently, the performance of these obligations cannot be enforced against the person of the debtor by means of an action seeking imprisonment for debt except in those exceptional circumstances where a specific enactment formally authorises this kind of proceeding. Article 2063. As a further consequence, the legal provisions which allow for this action for imprisonment must be interpreted restrictively and are not susceptible of being extended to other situations by analogy.70 Where imprisonment for debt is authorised exceptionally, the exercise of this recourse neither precludes nor suspends proceedings taken against the property in the patrimony. Article 2069. III. OF THE TRANSMISSION OF THE PATRIMONY OF A DECEASED PERSON § 582. Of the Transmission of Succession Considered in its Effects on Assets The aggregate of a person’s property does not lose its quality as a universality of law. It is in this quality that this property is transmitted, under the name 68 Because the circumstances of the bankruptcy are connected to the fact of the stopping of payments, a merchant may find himself in bankruptcy even as he sustains his business. Code de commerce, art. 437. 69 See arts. 214 and 372 to 383, § 172, text in fine; § 471, text and notes 5 to 8; § 550, text no 1. 70 Comp. Cass. civ., 4 January 1825, Sir., 31, 1, 55; Cass. civ., 19 January 1832, Sir., 32, 1, 687; Toulouse, 20 February 1832, Sir., 32, 2, 389; Cass. civ., 15 November 1834, Sir., 34, 1, 777.



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of succession, to those who are called upon to take the whole or an aliquot share of it either by law or by the will of the deceased. The person who succeeds to the whole or an aliquot share of the property of another is generally called the universal successor. But from a strictly theoretical point of view, this title is only really fitting for those who represent the deceased individual by continuing his legal person. Given that the patrimony is, in a manner of speaking, to be identified with the personality, it follows that those called upon to take the whole or an aliquot share of a deceased individual’s property, without continuing his legal person, actually succeed only to his property and not to his patrimony. Consequently, they are best thought of as particular legatees, with the notable difference that their title to property does not, as does that of particular legatees in the technical sense, bear on individually specified objects.71 In Roman Law, every person who succeeding in universum jus defuncti was, as heir, the legal representative of the deceased, whether or not he was called to the succession by law or by will. Under our Old Customary Law, on the other hand, the legitimate relatives enjoyed the title of heir, in the order in which the law called upon them to succeed, to the exclusion, in principle, of others. They alone were considered as continuing the legal person of the deceased; they alone were vested, pursuant to this title to property, with hereditary seizin.72 The Redactors of the Civil Code plainly followed the wayward path of Customary Law since, with the exception of the extraordinary text at article 1006, they only attributed hereditary seizin to the legitimate relatives of the deceased called to succeed to him under the law. The Redactors refused to grant seizin, whether explicitly or implicitly, to all other persons that one would ordinarily count among the universal successors, in particular irregular successors, legatees and donees by general title, and even universal legatees and donees where they are competing with heirs of reserved property.73 71 Zachariæ, § 577, text in principio and note 1. 72 These were the principles expressed, by contrast with Roman Law, by the adage Deus solus heredem facere potest, non homo, and the customary rules Institution d’héritier n’a point lieu and Le mort saisit le vif, son hoir le plus proche, et habile à lui succéder. It is true that some scholars, under the influence of Romanist thinking, assimilated universal legatees to heirs in certain respects. Moreover, the favour extended to marriage contracts rendered permissible a gift of future property in those contracts, and the donees thereof were commonly called contractually appointed heirs. But notwithstanding the foregoing, these legatees and donees were not considered as continuing the person of the deceased. Neither one of them was vested with hereditary seizin, except in certain rare customs, notably those of Burgundy and Nivernais. See on all of these matters, Loisel, Institutes coutumières, Laboulaye edit., Bk II, tit. IV, reg. 5, 9 and 14, tit. V, reg. 1. 73 This is what emerges, in the plainest fashion, from a reading of articles 724, 770 and 773, 1004,

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By establishing such a sharp distinction between these two orders of successors, the Redactors of the Code clearly manifested the intention, in keeping with traditional customs, to recognise as successors only those whom they vest with hereditary seizin. […] […] Hereditary seizin allows the legitimate relatives of the deceased74 to become, at the very moment of his death, owners and possessors of the property that makes up the succession, in the absence of any manifestation of intention by them, and even without their knowledge. As such, hereditary seizin is a legal fiction that, rationally, the legislator could only have established because it viewed the legitimate relatives of the deceased as continuing his legal person and, in point of fact, hereditary seizin was so established for this sole reason.75 The reverse, consequently, is also true: the other successors are denied hereditary seizin only because the legislator did not view them as continuing the person of the deceased. The legitimate relatives are not representatives of the deceased because they enjoy hereditary seizin but they are, instead, vested with this seizin because they continue the deceased’s legal person […]. After the death of the person who was the owner of the patrimony, its indivisible character continues to apply to the succession understood as the object of the right of succession. Among the consequences of this is the following: a sole heir cannot accept only a portion of the succession that devolves to him; and in cases where the succession devolves to several heirs, they are seized thereof, in an indivisible manner, at least until partition, such that the portions of those who renounce the succes1006 and 1011 together. It follows further that the exception provided, under article 1003, for the universal legatee who does not find himself in competition with the heirs to reserved property must also apply, in the same circumstance, to the universal donee of present and future property, or just of future property, in a marriage contract. 74 We will only consider the case of legitimate relatives because, in principle, they alone enjoy seizin. But it is certainly the case that everything that we say in respect of blood relatives also applies, exceptionally, to the legatee or the universal donee who is not in competition with the heirs of the reserve. 75 The correlation between the legal seizin of the heirs and the representation of the deceased by the heirs is formally established by the final provision of article 1220 according to which “[les héritiers ne peuvent demander la dette, ou ne sont tenus de la payer, que pour les parts dont ils sont saisis ou dont ils sont tenus, comme représentant le créancier ou le débiteur] heirs […] cannot demand payment of the debt or are not bound to pay it except in the proportion of the fraction of which they are seized or in which they are bound as representing the creditor or the debtor.” Does this not amount to saying, in the most forceful manner, that it is because they are representatives of the deceased, and only to the extent of this representation, that the heirs are vested with the advantages of the seizin, and find themselves subject, on the other hand, to the obligations that flow therefrom?



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sion necessarily increased the portion of those who accept it.76 Article 789. § 583. Of the Transmission of Debts that Encumber a Succession The universal successors in the proper sense of that expression, that is to say those who represent the person of the deceased, are not only called upon to take the whole or an aliquot share of the property in the deceased’s patrimony but they succeed to the patrimony itself. As a result they must answer, of right, and with their own patrimony, for all the debts that encumber the succession as if they had contracted those debts themselves. Article 724. The indivisibility of the succession considered as the object of the right of succession would naturally encourage the view that each heir must, as a consequence of his acceptance, be held liable for the whole of the debts of the succession rather than proportionally to the extent of his share.77 But, consonant here with Roman Law and the general law of customary France, the Civil Code rejected this corollary of the indivisibility of the succession in order to avoid the actions and recourses to which this would have given rise.78 Consequently, the Code provides that the debts of the succession are to be divided, of right, amongst the heirs so that each one of them will only be liable in proportion to his share in the succession, that is to say the share in respect of which he represents the deceased. Articles 873 and 1220. The heirs are responsible for this share even if, as a result of competition with legatees by general title or illegitimate children, it happens to be greater than the amount of their portion of the succession, that is to say what they in fact take from the succession. […] The indivisibility of hereditary seizin only ends with the effect of partition. It follows that, notwithstanding the legal division of the debts of the succession between the heirs, the total amount of each of these debts is guaranteed by the whole of the successoral property as long as partition has not taken place. In other words, the right of pledge that the creditors of the deceased enjoyed while he was alive continues, even after his death, to operate indivisibly on the whole of the succession up to the moment of partition.79 76 Zachariæ, § 575, text in medio. 77 It used to be the case in the territory in which the Custom of Amiens applied (art. 159), as well as in that of the Custom of Normandy (Reg. of 1866, art. 130). Merlin, Rép., see Debts, § 3, no 2. Demolombe, XVII, 20. 78 Zachariæ, § 575, text and note 1. 79 Prior to the partition of the succession, each creditor of the deceased unquestionably has the

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The successors improperly designated as universal, that is to say those who are only called upon to take the whole or an aliquot share of the deceased’s property, without representing his person and without, in strict speech, succeeding to his patrimony, should not, as a matter of theory, be responsible for payment of the debts of the succession.80 But contrary teachings, already recognised in the most recent developments of our old jurisprudence, were definitely enshrined in the Civil Code.81 This said, while the successors are liable to pay the debts of the succession, they are only so obliged as holders of successoral property and, in consequence, only to the extent of the value of the property which they have received. They are not required to answer with their own patrimonies and do not therefore have to resort to the benefit of inventory in order to limit their liability to the extent they have profited. In this respect, just as from the perspective of hereditary seizin when considered in its effects on assets, their position differs fundamentally from that of the universal legatees in the proper sense, that is to say the representatives of the deceased. […]

right to seize, for the whole amount of his claim, each and every item of successoral property. The division of the debts, effected as of right amongst the heirs, does not preclude this right to seize property. The division only gives rise to a personal action against the heirs, and has no impact on the assets of the succession which the heirs hold in indivision. Those assets remain, indivisible, and stand as the common pledge of the creditors of the succession until the partition is carried out. Lafontaine (Revue critique, 1856, XV, p. 335 et seq.) went so far as to argue that it must be the case even after partition is completed, but it appears to us that this paradoxical opinion cannot be defended seriously, either as a matter of legal theory or in light of the rules of our positive Law. Partition, which renders each heir an exclusive owner of the objects that fall within his lot, thereby breaks up the elements that make up the succession so that it can no longer be considered as constituting a universality of law or as forming, on this basis, the common pledge of the creditors of the succession. Once completed, partition renders it impossible for the creditors to lay claim to the hereditary property as such. They can no longer reach that property except as elements of the patrimonies of the heirs and on the basis of personal actions against them. 80 In keeping with this theory, the paritary legatee was not, under Roman Law, liable for the debts owed to the creditors of the succession. That legatee could only be held liable, in virtue of the stipulations partis et pro parte, vis-à-vis the heir, to contribute to the debts in proportion to the extent of his portion of the succession. Ulp., Freg., de fideicom., tit. 25, § 15; Thibaut, System des Pandekten Rechts, § 753. In our very Old Customary Law, it was also long contended that legatees by general title, and even universal legatees in competition with heirs, were not subject to payment of debts to creditors nor were they subject to the obligation to contribute to such payments vis-à-vis the heirs, at least not of right and independently of any stipulations partis et pro parte. Loisel, Institutes coutumières, bk. II, tit. 3, reg. 14. […]. 81 See arts. 871, 873, 1009 and 1012. […].

9  Trusting Patrimonies Alexandra Popovici*

A. INTRODUCTION B. THE STRANGE DESTINY OF TRUSTS AND PATRIMONIES IN QUEBEC (1) From sui generis ownership to distinct patrimony (2) Trust as patrimony by appropriation C. PATRIMONIES (1) Patrimony as property (2) Patrimony as personality (3) Patrimonies as legal universalities D. TRUST AS PATRIMONY (1) Trust, patrimony and obligations (2) Trust, patrimony and personality (3) Trust and purpose patrimonies E. THE PATRIMONIAL SHIFT

199 200 201 203 206 208 209 211 212 213 214 215 218

A. INTRODUCTION The trust has always been part of Quebec civil law. However, its inherent English nature, combined with the little attention it received under the Civil Code of Lower Canada, created an uneasy institution in quest of an identity. The recodification of 1994 was the ideal moment to civilise the beast, and it was through the notion of the patrimony, a civilian notion if there is one, that this civilisation took place. The introduction of the patrimony by appropriation in the Civil Code of Québec was prompted by the desire to recast the alien institution of the trust in a civilian framework. But what are the consequences of the new patrimonialised trust? By * Assistant Professor, Faculty of Law, McGill University; Researcher, Paul-André Crépeau Centre for Private and Comparative Law. I would like to thank Remus Valsan for his wonderful enterprise and Lionel Smith for introducing me to the poetry of Lepaulle. I am also grateful to all of my colleagues at the Crépeau Centre, especially, Jean-Frédéric Hübsch and Ludovic LangloisThérien for their invaluable assistance.

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choosing the patrimony by appropriation as the vehicle to integrate the trust into the most recent codification, the Quebec legislature has changed not only the framework of the trust, but also the overall juridical plan of ­private law. Rights according to the Civil Code of Québec now have two means of being: either they belong to persons, or they are appropriated to a purpose. The notion of patrimony is at the very heart of this conceptual revolution, which not only transforms all Quebec trusts into purpose trusts, but, more importantly, admits in Quebec’s private law rights without holders. As I will try to demonstrate, this revolution was able to take place without a rebellion because the legislature used the notion of patrimony to recast the trust. The power of the patrimony over the civilian imagination managed to ease this conceptual turn.1 The symbolic and normative power of the patrimony will be the main topic of this chapter. I will begin with a brief overview of the story of the trust in Quebec and try to explore why the patrimony, specifically the patrimony by appropriation, was chosen to recast the trust in the new code. I will then examine what it means to call a trust a patrimony and, more specifically, a patrimony by appropriation. To do that, I will first investigate the notion that seems to be fundamental to this profound change: the patrimony. A closer look at this central, and mostly taken-for-granted notion may help us understand what a trust is and, above all, how civil law is slowly changing its centre of gravity from a law organised around subjective rights to a law organised around the protection of socially validated interests. Trust as patrimony might just be a symptom of a more fundamental change. B. THE STRANGE DESTINY OF TRUSTS AND PATRIMONIES IN QUEBEC The destiny of trust in Quebec is, akin to the destiny of trust in the common law, marked by wonder and impossibility.2 The explanation of trust as patrimony marked a significant shift in this fascinating story.

  1 On the symbolic power of words in law in general and of patrimony in civil law in particular see R A Macdonald, “Reconceiving the symbols of property: universalities, interests and other heresies” (1994) 39 McGill LJ 761.   2 P Lepaulle, “The strange destiny of trusts”, in R Pound, E N Griswold and A E Sutherland (eds), Perspectives of Law: Essays for Austin Wakeman Scott (1964) 226.



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(1) From sui generis ownership to distinct patrimony Trusts have been understood by many to be alien to modern civil law.3 Their innate Englishness is hard to deny.4 However, as some have brilliantly demonstrated, it is possible to have trusts without equity5 and indeed, in Quebec this has been the case for quite a long time.6 Yet it was not an easy path. Even if trusts found their place in the Civil Code as early as 1889, the fourteen articles inserted were not without ambiguity.7 What was their fundamental flaw? After reading the articles it was impossible to know who was the owner of the trust property once it was conveyed to the trustee. As explained by the Supreme Court of Canada: The difficulty arose, however, from the ambiguity of these new provisions. Thus, art 981a provided that trust property is conveyed to trustees, whom art 981b describes as depositaries and administrators, whereas the same section refers to the beneficiaries as donees or legatees. On the other hand, art 981l provides that at the termination of the trust, the trustees must do whatever is necessary to vest the property held for the trust in the parties entitled thereto.8

Thus for almost a century, jurists and judges struggled to find a way to understand who the real owner of the trust property was.9 The final say came in 1982 from the Supreme Court of Canada in Royal Trust v Tucker: the trustee, according to Justice Beetz, had “a sui generis property right, which the legislator implicitly but necessarily intended to create”.10 A clarification had been given, but many authors reacted violently to this official

  3 H Motulsky, “De l’impossibilité juridique de constituer un ‘Trust’ anglo-saxon sous l’empire de la loi française” (1948) 37 Revue critique de droit international privé 451. For a more recent Quebec account, see M Cantin Cumyn, “La fiducie et le droit civil” in R Janda and L Comtois (eds), Conférences Meredith 1991: Planification successorale/Estate Planning (1992) 159.   4 Yet, some have tried: H P Glenn, “The historical origins of the trust”, in A M Rabello (ed), Aequitas and Equity: Equity in Civil Law and Mixed Jurisdictions (1997) 749.  5 G L Gretton, “Trusts without equity”, Ch 5 above. For another take, see L Smith (ed), Re-imagining the Trust: Trusts in Civil Law (2012).   6 Trusts were used early on in Quebec. To control the mechanism, a special law was enacted in 1879, An Act concerning the Trust, SQ 1879, c 29. However, the 1866 Code already knew some forms of trusts: charitable legacies (art 869) and fiduciary substitution (art 964). See J E C Brierley, “Titre sixième. De certains patrimoines d’affectation. Les articles 1256-1298”, in Barreau du Québec & Chambre des notaires, La réforme du Code civil, vol 1 (1993) 735 at 739 ff.   7 In 1889, the provisions from An Act concerning the Trust, SQ 1879, c 29, were incorporated into the Civil Code of Lower Canada at art 981 ff under LRQ 1888, art 5803.  8 Royal Trust Co v Tucker [1982] 1 SCR 250 at 268, emphasis in original.   9 On the controversy it generated see S Normand and J Gosselin, “La fiducie du Code civil: un sujet d’affrontement dans la communauté juridique québécoise” (1990) 31 C de D 681. 10 Royal Trust Co v Tucker [1982] 1 SCR 250 at 272.

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interpretation.11 According to one leading author, sui generis ownership of the trustee was in civil law a complete heresy. The situation of the trustee had nothing to do with ownership since the right that he was holding was not part of his patrimony and he was not holding it for his own interest. Understanding trustees’ rights as sui generis ownership not only denatured what we understood as subjective rights, it fundamentally adulterated the civil law.12 With reactions like that, it is not surprising that when the committee in charge of trusts in the Civil Code Revision Office examined the law, their solution had to be drastic: they had to naturalise this alien ownership and civilise the institution.13 They came up with two main propositions, neither of which prevailed. The first one was to give trusts legal personality. With the trust as a legal person, the problem of ownership was solved; the trust, as a legal person, was the owner of the trust property, the trustee a mere administrator and the beneficiary had a personal right against the trust itself. This vision had many defenders, some very convincing, arguing that this way of understanding the trust was the most civilian.14 Yet practitioners did not endorse this vision, finding it too remote from its common law counterpart, and the idea was rapidly set aside.15 With fiduciary ownership and legal personality completely out of the question, the committee had to be imaginative. Their final proposition was a bit strange however. Instead of tackling the ownership problem head-on, they came up with a bizarre answer; an answer that we will see is not foreign to the subject of this volume. The final, official and published version of the draft articles proposed by the committee in charge of trusts at the Civil Code Revision Office provided that

11 Note that some thought this vision was the most civilian: F Frenette, “La propriété fiduciaire” (1985) 26 C de D 727. 12 M Cantin Cumyn, “La propriété fiduciaire: mythe ou réalité?” (1984) 15 Revue de Droit de l’Université de Sherbrooke 7. 13 See Brierley (n 6) at 742. 14 Yves Caron was the main advocate for this position. See his position in Y Caron, “The trust in Quebec” (1979-1980) 25 McGill LJ 421. 15 J E C Brierley, “Editor’s post-scriptum” (1979-1980) 25 McGill LJ 440 at 441. See also, M Cantin Cumyn, “Pourquoi définir la fiducie comme un patrimoine d’affectation?”, in N Kasirer (ed), Colloque du trentenaire, 1975-2005. Regards croisés sur le droit privé / Thirtieth Anniversary Conference, 1975-2005. Cross-examining Private Law (2008) 131. Today this concern is still shared: as Professor Smith has argued: “it would be a mistake for any legal system to conceptualize the trust as a legal person, since the result will only be to eliminate the trust as a fundamental legal institution”; L Smith, “Trust and patrimony”, Ch 3 above at 43.



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603. Les biens transportés en fiducie forment un patrimoine distinct.

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603. Property transferred in trust constitutes a patrimony which is distinct from that of the trustee.16

Although the proposed provisions were not adopted by the legislature in the final round – indeed, who could say who was the owner of the trust property by reading such a provision?17 – this proposal is important as it brought something fundamental into the picture: the civilian notion of patrimony for understanding the trust at a legislative level. (2) Trust as patrimony by appropriation Before addressing the current trust in the Civil Code of Québec, it is important to note the time span between the first proposed trust just mentioned and the one in force today. The Civil Code Revision Office produced its final report in 1977.18 History tells us that a new draft civil code reworked by the legislative drafters of the ministère de la justice du Québec was tabled in the National Assembly in December 1990; it was then passed in December 1991, and came into force only in 1994. In the years between the first proposal and the final draft of the new civil code, the controversy surrounding the trust was not attenuated. On the contrary, judgments and articles abounded, trying to grasp the nature of the alien institution and to give possible solutions to the irreducible problem of the ownership of the trust.19 The solution which finally prevailed – patrimony by appropriation – was not at all obvious. No other example of the trust as patrimony by appropriation existed in other jurisdictions at the time,20 and to this day, how and exactly why the patrimony by appropriation was chosen as a mechanism for

16 Civil Code Revision Office, Report on the Quebec Civil Code (1977), vol 1, book IV, arts 600-638; vol 2, t I, at 523-531. The working papers of the Office, as well as its Final Report, are available at http://digital.library.mcgill.ca/ccro/index.php. 17 Brierley’s description of this issue is eloquent: “But what of ownership of the trust property? If neither fiduciary ownership nor personality for the trust are explicitly adopted, how does the final draft resolve the matter of the coexistence of the trust with the exigencies of the traditional principle of ownership? The answer is simply that it does not resolve this question at the level of explicit textual expression. In this regard the proposed texts mark no apparent advance over the existing legislation”; Brierley (n 15) at 442. 18 See n 16. 19 For a good review, see Normand & Gosselin (n 9). 20 R Becker, A Question of Trust – An Analysis and a Comparative Assessment of the New Quebec Trust (thesis) (1995) 48.

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the Quebec trust is still unsettled.21 We know that the section on the trust was completely reworked by the draftsmen of the ministère, but this means that their work is not easily available. Other hints have been left behind. One doctrinal article, written by a notary who worked for the ministère at the time of the recodification, sheds a bit of light on the matter. Pierre Charbonneau in “Les patrimoines d’affectation: vers un nouveau paradigme en droit québécois du patrimoine”22 puts forward the idea that the theory of patrimony by appropriation could be a possible new way of understanding private rights in Quebec’s law generally. Examining different theories of patrimony and institutions, Charbonneau builds on German doctrinal work, especially Brinz and Bekker,23 and on the work of Pierre Lepaulle24 to make the argument that trusts are, in Quebec civil law, autonomous patrimonies by appropriation.25 His work clearly had a great influence on the legislature, which adopted his vision of the patrimony26 and more specifically Lepaulle’s vision of the trust. If the impact of Charbonneau’s work on the trust as we know it has not been fully acknowledged, Lepaulle’s influence has.27 There is no doubt that the articles on the trust in the Civil Code of Québec are infused with his work.28 Lepaulle’s depersonalised trusts are now the law: 1260. La fiducie résulte d’un acte par lequel une personne, le constituant, transfère de son patrimoine à un autre patrimoine qu’il constitue, des biens qu’il affecte à une fin particulière et qu’un fiduciaire s’oblige, par le fait de son acceptation, à détenir et à administrer.

1260. A trust results from an act whereby a person, the settlor, transfers property from his patrimony to another patrimony constituted by him which he appropriates to a particular purpose and which a trustee undertakes, by his acceptance, to hold and administer.

21 See Cantin Cumyn (n 15) at 138. 22 P Charbonneau, “Les patrimoines d’affectation: vers un nouveau paradigme en droit québécois du patrimoine” (1982-1983) 85 R du N 491. 23 Ibid at 508. 24 See P Lepaulle, Traité théorique et pratique des trusts en droit interne, en droit fiscal et en droit international (1932). Ch 2 above provides an English translation of the first chapter of Lepaulle’s work. 25 Charbonneau (n 22) at 526. 26 The Minister of Justice clearly had this text in mind when he wrote his commentaries on article 2 of the Civil Code of Québec in Ministère de la justice, Commentaires du ministre de la Justice – Le Code civil du Québec, un mouvement de société (1993), under art 2. 27 See for example J Beaulne, Droit des fiducies (1998) 8. 28 For more on the Lepaullian influence on the Civil Code of Québec see A Popovici, “La fiducie québécoise, re-belle infidèle”, in A Popovici, L Smith and R Tremblay (eds), Les intraduisibles en droit civil (2014) 129.



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1261. Le patrimoine fiduciaire, formé des biens transférés en fiducie, constitue un patrimoine d’affectation autonome et distinct de celui du constituant, du fiduciaire ou du bénéficiaire, sur lequel aucun d’entre eux n’a de droit réel.

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1261. The trust patrimony, consisting of the property transferred in trust, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary and in which none of them has any real right.

Accordingly, in the Civil Code of Québec, the ownership of the property in trust is settled – no one owns the trust property. The problem, instead of being answered, was simply erased.29 However, like their predecessors, the articles organising the trust and its regime30 cannot be said to be without ambiguity. Even if article 1261 is understood to mean that none of the agents implicated in the trust has any real right in the trust property, thus putting aside the question that tortured lawyers and jurists under the old code, still the actual nature of the trust under the new law is not that clear. Indeed, it might be a patrimony by appropriation, but if we do not know what a patrimony is, then we are left a bit baffled. And bafflement it is, as nowhere does the legislature define this fundamental notion in the code. According to the Justice minister at the time: It did not seem useful to define the notion of patrimony; in previous law, the absence of such a definition did not cause difficulties. Furthermore, the notion of patrimony constitutes a complex reality, which is difficult to express in a simple definition that would need to respond to all kinds of theoretical questions.31

I will first try to articulate what a patrimony is before examining what it means to say that trust is a patrimony and, more particularly, a patrimony by appropriation. As we will see, the history and the importance given to the patrimony today in civil law is particular and requires assessment.

29 See S Normand, “La culture juridique et l’acculturation du droit: le Québec” (2011) 1(2) ISAIDAT LR 825, available at http://isaidat.di.unito.it/index.php/isaidat/article/viewFile/56/66. 30 Civil Code of Québec (SQ, 1991, c 64), art 1260 ff, available online at: http://www2.publicationsduquebec.gouv.qc.ca/dynamicSearch/telecharge.php?type=2&file=/CCQ_1991/CCQ1991_A. html. 31 My translation of: “Il n’a pas semblé utile de définir la notion de patrimoine; l’absence d’une telle définition dans le droit antérieur n’a pas soulevé de difficultés, et, par ailleurs, cette notion constitue une réalité complexe, difficile à exprimer dans une définition simple qui répondrait à toutes les questions théoriques”. Ministère de la justice, Commentaires (n 26) under article 2.

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C. PATRIMONIES There is no need to reiterate that the patrimony is not to be found in the common law, that is, before Professor Smith started seeing it everywhere,32 and others like Professor Penner, in need of a notion to articulate the idea, found strange words to crystallise it.33 Patrimony is indeed a profoundly civilian notion. In the civil law today, it is understood as a fundamental legal notion, une grande notion du droit privé akin to persons, subjective rights, property, contract, and civil liability.34 The notion is so fundamental to the civilian epistemic community that it has been said that it is impossible for civilians to think of private law without it today.35 What is more, the patrimony is so important to the civilian imagination that it has even become a way to categorise rights: rights in the civil law not only are real or personal, but also patrimonial or extra-patrimonial.36 Yet the history of the patrimony differs from the histories of other fundamental notions. The patrimony was, not so long ago, a purely heuristic theory trying to make sense of private law principles such as the common pledge of creditors.37 In fact, the patrimony as we understand it today is a very recent doctrinal idea. The notion, even if we find it in Roman texts, is primarily a nineteenth-century creation38 and is not found in the Napoleonic Civil Code of 180439 or the Civil Code of Lower Canada. 32 L Smith, “Scottish trust in the common law”, Ch 7 above. 33 “Wherewithal is comparable to the Roman and civilian term patrimonium which indicated all the property in someone’s estate; in some modern civil law systems, this term might now be more inclusive, covering all the rights of an individual.” See J E Penner, The Idea of Property in Law (1997) 129. 34 J Rochfeld, Les grandes notions du droit privé, 2nd edn (2013). 35 N Kasirer, “Translating part of France’s legal heritage: Aubry and Rau on the Patrimoine”, Ch 8 above at 165. See also F Zénati, “Mise en perspective et perspectives de la théorie du patrimoine” (2003) 4 RTDCiv 667. Maybe the introduction of patrimony in Scottish law by the means of trust was thus an ultimate appeal to its civilian roots? 36 For example Jacques Ghestin and Gilles Goubeau, in their introduction to civil law, devote a complete chapter to classification of subjective rights today. They note that the two principal classifications are (1) according to the patrimoniality of the right, so whether a right is patrimonial or extra-patrimonial; and (2) according to its object, that is, if the object of the right is real or personal. J Ghestin and G Goubeaux, Traité de droit civil, introduction générale, 4th edn (1994) 156 ff. The patrimonial distinction seems to have crossed borders: G Gretton, “Ownership and its objects” (2007) 71 Rabels Z 802. Professor Gretton here uses the idea of patrimonial rights as a structuring idea to understand the nature of ownership. 37 See D Hiez, Étude critique de la notion de patrimoine en droit privé actuel (2003) 10. 38 The fathers of the civilian notion as we still understand it today are undeniably C Aubry and F-C Rau, Cours de droit civil français d’après la méthode de Zachariæ, 4th edn (1873). 39 On the deafening silence of the code with respect to the patrimony see R Cabrillac, “Rapport de synthèse. Le patrimoine. Existence multiple. Essence unique?” (2005-Jan) Droit et Patrimoine 82.



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That being said, it is undeniable that today patrimony seems to be everywhere.40 For example, in the Civil Code of Québec, the word is used more than sixty times and, more significantly, it is found right at the beginning of the code. As such, the first paragraph of article 2 states, unashamedly, that “Toute personne est titulaire d’un patrimoine / Every person has a patrimony” without any other explanation.41 In France, the word itself does not appear as often in the Civil Code. In a reform project on property law, however, some scholars suggested the insertion in the code of a definition of patrimony, alongside property, real rights and personal rights. The proposed definition reads like this: The patrimony of a person is a legal universality made of property and obligations, actual and future, the assets being answerable for the liabilities. Every person, physical or legal, has a patrimony and, except if the law permits o­ therwise, only one.42

Thus, from mere theory, the patrimony has developed into a fundamental legal notion; from mere description, patrimony has become legal prescription. Few doctrinal notions can be said to have had such an influence in so little time.43 Of course, the notion and the theory it stems from are not without ambiguity, but, as we will see, the power of the word might come from its versatility and abstraction.

40 I focus here on the civil codes of Quebec and France, but as an example it is interesting to note that the new Romanian code, which came into force in October 2011, includes and defines the notion of patrimony: D Borcan and M Ciuruc, Nouveau Code civil roumain, traduction commentée (2013) art 31. 41 As of 5 May 2014, 1580 articles in the English version of the Civil Code of Québec were corrected by the Service de refonte of the ministère de la Justice with a view to reconciling the French and English versions. Art 2 was one of them and now reads “Every person is the holder of a patrimony”. 42 My translation of: “Article 519. Le patrimoine d’une personne est l’universalité de droit comprenant l’ensemble de ses biens et obligations, présents et à venir, l’actif répondant du passif. Toute personne physique ou morale est titulaire d’un patrimoine et, sauf si la loi en dispose autrement, d’un seul”, in H Perinet-Marquet (dir), Propositions de l’Association Henri-Capitant pour une réforme du droit des biens (2008), available online at http://www.henricapitant.org/sites/default/ files/Avant-projet_de_reforme_du_droit_des_biens_19_11_08.pdf. 43 As expressed by Professor Macdonald, “symbolically, the word carries much freight within the Civil law tradition. For several generations the term patrimony has served as a pedagogical concept for the teaching of basic property law; regardless of the imprecision of the idea and the specific content that is attributed to the expression, it is perceived as part of the intellectual structure of the Civil law.” Macdonald (n 1) at 784.

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(1) Patrimony as property Patrimony, as the etymology of the word reveals, is the heritage of the father. When used in a non-legal manner, the word patrimony refers to what a person has and what he will leave behind. In French, patrimony is even used in relation to cultural heritage. A person’s patrimony is his fortune, his estate. It is a mere mass of things, of assets.44 Patrimony is what a person or an entity has as a whole, “all the property”.45 It is a way to express a person’s wealth. Here, the expressions “to have a patrimony” or “to own a patrimony” seem quite clear: patrimony is only a mass of property.46 Some authors have championed this vision of the patrimony in law, arguing that a patrimony is and should only be a mass of valuables.47 The notion as we understand it spontaneously today in civil law is, however, more than a mere aggregate of property; it is more than a de facto universality and, as we will see, that is where its magic comes from. Indeed, the ambiguity of the word property, in French biens, is the key to understanding the notion of patrimony. Patrimony understood in an economic, non-legal way might be a mere corpus of valued things, whether corporeal (for example, a house, a car, jewellery) or incorporeal (for example, traditions, songs, even the value of a claim). When translated into law, however, this idea falls and patrimony as property becomes a bit more complex: patrimony comprises only rights.48 Patrimony here becomes a different device, where, as Dabin argued, “the

44 The family patrimony in the Civil Code of Québec (art 414 ff) is a good legal example of this understanding of patrimony. 45 These are the words of Aubry and Rau, the founding fathers of the notion as we still u ­ nderstand it today: see Nicholas Kasirer’s translation of an excerpt of Charles Aubry (1803-1882) and Frédric-Charles Rau (1803-1877), Cours de droit civil français (n 38), in Kasirer (n 35) at 177, n 1. 46 See for example F Zénati, “Patrimoine” (1994) RTDCiv 888 which states the idea very simply: “Le patrimoine n’a jamais été rien d’autre qu’une universalité, c’est-à-dire, nonobstant sa spécificité, un bien”. 47 See M N Mevorach, “Le patrimoine” (1936) 35 RTDCiv 811. This author argued that understanding patrimony as a universality containing both assets and liabilities on the basis of the common pledge of the creditors makes absolutely no sense, the creditors being only interested in the mass of assets, present and future. Others have argued that liabilities had nothing to do with patrimony as liability springs not from the notion of patrimony, understood here as property, but from personality and obligations: see H Gazin, Essai critique sur la notion du patrimoine dans la doctrine classique (1910); S Guinchard, L’affectation des biens en droit privé français (1976) 331 ff; A Sériaux, “La notion juridique de patrimoine: brèves notations civilistes sur le verbe avoir” (1994) 93 RTDCiv 801; and more recently, Hiez, Étude critique (n 37). 48 For a recent account of this important idea, see R Anderson, “Words and concepts: trust and patrimony”, in A Burrows, D Johnston and R Zimmermann (eds), Judge and Jurist: Essays in memory of Lord Rodger of Earlsferry (2013) 347.



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right becomes the thing and the thing becomes the owner”,49 leading the way to the more orthodox understanding of patrimony in law: patrimony as a mirror of personality. (2) Patrimony as personality Here, invoking Aubry and Rau is essential. In their Cours de droit civil français d’après la méthode de Zachariæ, inspired by German doctrinal work, these authors developed what is now called the subjective or classical theory of the patrimony in order to explain certain matters in the French Civil Code of the time, mainly issues regarding succession and the common pledge of creditors.50 For Aubry and Rau, patrimony is the emanation of personality. The core of their theory of patrimony is indeed bound to the fundamental civil law notions of person and subjective right, that is, a right understood as being exercised in the holder’s own interest. Patrimony is thus a way to explain law through subjectivity and will. Patrimony is indeed a notion grasping the post-revolutionary legal air du temps; it is a profoundly liberal notion. The power of the notion stems not only from its political roots, but also from its actual legal construction, which is dual: patrimony is both the container – the juridical capacity of a person to hold rights, sa puissance juridique51 – and the content – that person’s rights and obligations, present and future, understood as a whole where the rights, always understood in pecuniary terms, answer for the obligations. As stated by Aubry and Rau and Nicholas Kasirer: The patrimony is, in its most exalted expression, the very personality of man considered in its relations with exterior objects upon which he has or will have rights to exercise. The patrimony encompasses not only property already acquired in actâ, but also property to be acquired in potentiâ. This is aptly expressed in the German word Vermögen, which means at once capacity and patrimony. A person’s patrimony is his juridical authority, considered in absolute terms, free from any limits in time and space.52 49 My translation of: “Le droit se confond en quelque sorte avec la chose, qui elle-même se confond avec le propriétaire”; J Dabin, Le droit subjectif (1952) 178. 50 For an enlightening presentation of the authors and their subjective theory, and a new English translation of a section of their most canonical text, see Kasirer (n 35). 51 Duncan Kennedy, looking at the work of Savigny, translates the word patrimoniality by “potentiality” which really captures the idea of legal power at stake here. See D Kennedy, “Savigny’s family/patrimony distinction and its place in the global genealogy of classical legal thought” (2010) 58 AJCL 811 at 813. 52 Kasirer (n 35) at 178, n 6. Aubry and Rau’s description of the German notion Vermögen is worth underlining: they use the words capacity and patrimony to describe it, yet here we should read capacity and property.

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According to Aubry and Rau, this purely subjective and economic organisation of assets and liabilities has three fundamental outcomes: (1) every person, physical or legal, has a patrimony – the container. This container may be empty, but it is always there as it represents the person’s juridical capacity. Its content fluctuates over time. Bound to the person in law, it is non-transmissible inter vivos but transmissible as a whole mortis causa; (2) every person has only one indivisible patrimony – as the person is unique, so too is his patrimony. There can only be one container. The patrimony is the economic mirror of the person in the juridical realm, and all his property as a whole is thus charged with the performance of all his obligations (the common pledge of the creditors). Patrimony is a legal universality; and (3) a patrimony cannot exist without a person, physical or legal, as its holder; only persons can have rights and obligations.53 In the civilian tradition, this personal and economic understanding of patrimony is predominant. When we read the word patrimony in law today, this subjective vision is what we read. Article 2 of the Civil Code of Québec should indeed not be read as saying, “Every person has property”, which obviously is not true, but as “every person has the possibility of having property – that is rights, or as everybody says today, patrimonial rights -, and his property, as a whole, is what represents him in the realm of the law”. We are not that far from Dabin’s idea. The economic and obligational aspects are important to underscore here. As one author has argued, the power of the notion derives from its explicative value: the patrimony has become fundamental because it helps to explain the shift from execution of an obligation on the person to execution on his property, that is so central to private law today. 54 When we talk about patrimonial rights, we talk about the rights upon which an obligation can be executed. The patrimony here is above all the economic mirror of the personality in the legal realm. It is more than property. In fact, patrimony manages in one single word to embody the sacred civilian trinity: PersonProperty-Obligation. The power of the word stems from its capacity to express, simultaneously, being, having and owing in law. Nonetheless, if the word patrimony is forever associated with its creators and their subjective and voluntarist theory of patrimony, the fact that the word carries many meanings at once: the aptitude to have rights – the 53 See Charbonneau (n 22) at 499 for another explanation of these outcomes. 54 F Cohet-Cordey, “Valeur explicative de la théorie du patrimoine en droit positif français” (1996) 95 RTDCiv 819.



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c­ ontainer – and the actual rights and liabilities – the content –, has generated a lot of criticism. (3) Patrimonies as legal universalities Early on, the subjective theory of patrimony faced some opposition: in response to the classical theory, the objective theory of patrimony, also known as the modern theory of patrimony, was elaborated. Emanating from Germany, this theory has been said to have had little influence over the French civilian imagination and its descendants. Yet, as we will see, it seems that the vision of patrimony that it portrays might be gaining more and more popularity. The starting point of this theory is that personality is not necessarily what brings property together as a whole in the eye of the law. Other purposes can bring property and liabilities together. What changes with this vision of patrimony is what triggers the “container”. For Aubry and Rau, the container and the person are one and the same; for scholars of the purpose theory,55 the containers can be multiple and can change according to the purpose or the necessity. For Aubry and Rau and their followers, will is the key. For purpose theory thinkers, interest is the key.56 Before looking at the outcomes of this modern theory, it is important to immediately underscore the resemblance between the two theories: in both theories the patrimony still represents an aggregate of rights and liabilities understood in pecuniary terms. The patrimony is in both cases a legal universality. With the purpose theory, however, the patrimony is slowly moving away from its origin: in the objective vision, the patrimony has nothing to do with the heritage of the father, it has nothing to do with personality either, it is only a way to confine rights and liabilities. It is only a legal universality. To some it is, in fact, the only legal universality.57 Nevertheless, understanding the patrimony as a mere legal universality that has nothing to do with personality brings about new outcomes: (1) patrimonies are transmissible; as a mere mass of assets and liabilities, not bound to particular person, patrimonies can be transmissible inter vivos; a 55 The theory is said to be first articulated by the German authors Brinz and Bekker. For a French understanding of this theory, see L Michoud, La théorie de la personnalité morale et son application en droit français, 2nd edn (1924) 38 ff. See also F Bellivier, “Brinz et la réception de sa théorie du patrimoine en France”, in O Beaud and P Wachsmann (eds), La science juridique française et la science juridique allemande de 1870 à 1918 (1997) 165. 56 See L Duguit, L’état, le droit objectif et la loi positive (2003). 57 Pierre Lepaulle is one of them. See Lepaulle, Traité (n 24).

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patrimony is only something you have, not something you are; (2) a person can have as many patrimonies as needed; as purpose is the key, the multiplication of patrimonies held is not problematic. You can have a patrimony for yourself, one for your family, and another for your enterprise, each answering to their own creditors. It only becomes a question of publicity for third parties. Note that here, real subrogation is the key, it is what permits each legal universality to keep its affectation; and (3) patrimonies can exist without a person. This last outcome stems from a specific vision of the purpose theory, the one that was chosen by the legislature to understand the trust in the Civil Code of Québec. Yet, as we will see, it is quite controversial as it breaks from the classical understanding that rights and liabilities stem from personality. To have legal universalities without personality as their end is not so problematic, but to have legal universalities without personality as their means and end implies a reorganisation of what we make out to be a right. D. TRUST AS PATRIMONY Patrimony is thus a polysemic term. Polysemy in law is nothing new. However, when it touches a notion as important as patrimony, confusion is bound to arise. More dramatically, the jurality of the notion might be questioned.58 Is patrimony simply a new way to express something that was already there, or is it a fundamental legal notion? One thing that we might extract from the different accounts just examined is that whether patrimony expresses a mass of property, personality or legal universality, all accounts have one thing in common: they all correspond to a universality, whether factual or legal. A universality is, simply put, an aggregate of property forming a whole in the eyes of the law. That being said, if this seems to be the core of what a patrimony is, surely universality and patrimony are not the same thing at law. There is a certain something in a patrimony that distinguishes it from mere universality. This certain something is what I would like to uncover now, by looking at these different forms of patrimony in regards to the trust. Indeed, the trust plays an important role in our understanding of patrimony today. In Quebec, the importance of the patrimony in the code follows undeniably the insertion of the trust as a pat-

58 Hiez, Étude critique (n 37). Mr Hiez argues that the notion of patrimony is not necessary and should be abandoned.



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rimony by appropriation;59 in Scotland, the word has only really come to the foreground since Professors Gretton and Reid used the notion to articulate the trust. Understanding what it means to call a trust a patrimony might help us understand what a patrimony really is. (1) Trust, patrimony and obligations As mentioned before, the inspiration for the Quebec patrimonial trust is undeniably Pierre Lepaulle’s work. Lepaulle’s understanding of the English trust as patrimony is central to the proliferation of the trust-patrimony equation found in the civil law today. However, if we follow the argument of Professor Smith, Lepaulle’s work is based on a mistake: the common law trust is not a patrimony. According to him, a trust in the common law is an aggregate of property, understood as a whole, which knows no liability. The trustee holding the trust property is personally responsible for any liability flowing from the trust. This, he argues, creates quite a complicated situation in case of a change or bankruptcy of the trustee; more specifically, it underscores the importance of the trustee in the creation and life of the trust. “The trust is the obligation that is owed by the trustee” he reminds us.60 The common law trust according to Professor Smith is a personal obligation in relation to a particular mass of property; it has nothing to do with patrimony. Or does it? Could we imagine calling this account of trust a patrimony? Certainly, although patrimony would have to be stripped of some of its attire. In civil law, it is possible to imagine an operation where a person holding trust property would be constrained to specific obligations upon specific property.61 Here the notion of legal universality would not be necessary because obligations are understood to be the key. The person holding the trust would be responsible personally. He would hold the trust property in his own name. The trust property here would thus be a mere mass of property, a de facto universality. It could even be only one simple asset. Basically, there is nothing to prevent the trust, understood as an aggregate of property plus personal obligations, from working in civil law. The trust could be a patrimony, albeit a non-legal one. If this obligational vision of trust is gaining more and more popularity 59 See Macdonald (n 1). 60 See Smith (n 15). 61 See R Valsan, “Rights against rights and real obligations”, in L Smith (ed), The Worlds of the Trust (2013) 481.

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over the dual ownership metaphor in common law, what it reveals about the patrimony in civil law is fascinating: the non-legal understanding of patrimony might be the key! Understanding patrimony as a mere de facto universality, a mere mass of property seen as a whole, if it strips the notion from any legal normativity, might in fact help to put the emphasis back on what is important: the personal nature of obligations at law and the flexibility of the notion.62 What this demonstrates also is where Lepaulle’s misunderstanding of the common law really lies: it is not in saying that trust is a patrimony per se, but in his understanding that a trust does not need a trustee to exist. According to him: [A]ny definition of the trust that sees it as an allocation of rights between the trustee and the cestui, or as a legal relationship trustee-cestui-settlor, is clearly false, because one cannot define the essence of an institution as a series of relationships among three people when none of those people is essential to its existence.63

By depersonalising the trust and the obligations that follow, Lepaulle did misinterpret the common law: trust property must have a holder in the common law. But what about his understanding of the civil law? Can we have property and obligations bereft of personality in the civil law? (2) Trust, patrimony and personality Lepaulle had to have a particular understanding of the patrimony for his construction – trust as patrimony – to make sense. Indeed, the patrimony according to him is not a mass of property but “an aggregate of rights and liabilities, having pecuniary value, and forming a legal universality”.64 If this definition seems quite satisfying to any contemporary,65 Lepaulle did manipulate what was at the time the accepted understanding of patrimony, that is “the aggregate of the rights and obligations of a person”.66 For his understanding of trust to make sense, the holder of the patrimony had to be pushed aside. For Lepaulle, neither the settlor, the trustee nor the beneficiaries are necessary for the trust to exist. Only the purpose is essential. Thus, for the trust to be able to find its place in the civilian architecture, 62 See Hiez, Étude critique (n 37). 63 Lepaulle, Traité (transl, Ch 2 above) (n 24) at 27. 64 Ibid at 35. 65 See the definition found in F Allard, F Brochu, É Charpentier, P-A Crépeau, M Devinat, Y Emerich, N Kasirer and M Naccarato, Dictionnaire de droit privé et lexiques bilingues – Les biens / Private Law Dictionary and Bilingual Lexicons – Property (2012) under “patrimony”. 66 Lepaulle, Traité (transl, Ch 2 above) (n 24) at 31.



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personality had to be reconsidered and it was: personality, according to him, is only a legal technique whose necessity is justified by its simple utility.67 Years later, Lepaulle changed his mind on this specific idea: the trust’s best civilian attire, he finally argued, should not be a depersonalised patrimony but legal personality, thus a subjective patrimony. After years of trying to grasp trust in the civil law, he realised that only legal personality really could emulate the English trust.68 Hence the trust should not be a patrimony but the holder of a patrimony. It is true that, in the common law69 and in the civil law70 the trust is often taken for a juridical person. Jurists in Quebec have even tried to explain the current trust as a new type of legal subject, a sujet de droit, which would have almost all the attributes of a legal person bereft of personality rights.71 Contrary to a legal person or a physical person, who holds both patrimonial and extra-patrimonial rights, a trust, in this understanding, would only be an autonomous patrimonial entity. However, to turn the trust into a person is to eradicate the trust as a fundamental legal institution. Certainly, it allows the creation of a distinct personal patrimony, but legal personality is not the only way to achieve patrimonial autonomy. And, as we will see, patrimonial autonomy seems to be at the heart of what triggered the now irrevocable association between trust and patrimony. (3) Trust and purpose patrimonies The turn to legal personality in civil law to understand the trust results from one main idea: to find a way for the trustee to hold the trust property and the liabilities that come with it separately from his own. Even if legal personality was the most orthodox way to achieve separation of assets and limited liability, the same can be achieved with the idea of “patrimony plus office”.72 There are two different ways of envisioning the office of the trustee that correspond to two different visions of purpose patrimonies and two different visions of the trust as understood in the civil law: trust as separate patrimony 67 Ibid at 41. 68 P Lepaulle, “La notion de ‘trust’ et ses applications dans les divers systèmes juridiques”, in Actes du congrès internationalde droit privé tenu à Rome en juillet 1950, vol 2, L’unification du droit / Unification of Law (1951) 197 at 207. 69 L Smith, “Mistaking the trust” (2010) 40 HKLJ 787. 70 G L Gretton, “Up there in the Begriffshimmel?”, in L Smith (ed), Worlds of the Trust (n 61) 524. 71 M Cantin Cumyn, “La fiducie, un nouveau sujet de droit?” in J Beaulne (ed), Mélanges ErnestCaparros (2002) 129. 72 Gretton (n 5) at 106.

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(which prevails in Scotland) and trust as patrimony by appropriation (which prevails in Quebec). The distinction between the two modes of delimiting purpose patrimonies is frequently neglected, division and appropriation being too often understood as interchangeable.73 The distinction is however of great importance because, as we will see, it might be that with the explanation of trust as separate patrimony “everything falls into place”74, but with the explanation of trust as patrimony by appropriation everything falls into pieces. Separate patrimonies are not foreign to the civil law. Division of the patrimony is a mode of organisation of rights and liabilities that we find in many different sites: property exempt from seizure,75 property under estate administration,76 substitutions,77 and the family patrimony78 have all been understood as separate patrimonies. When a patrimony is divided, the holder’s legal rights are subject to a different regime of use, enjoyment and distribution.79 According to this understanding of purpose patrimonies, a person can hold many patrimonies, or what have been called small patrimonies or special patrimonies,80 and each patrimony is the common pledge of its own creditors.81 Even if it questions the indivisible quality of patrimonies championed by Aubry and Rau in the classical theory, this way of understanding purpose patrimonies has long been accepted in positive law as it does not question the vital link that exists between subjective rights and persons. With division, a person is still the holder of rights and the debtor of obligations. With division, patrimony is still about being, having and owing. It just means that there are different ways of being, having and owing. The rights divided are 73 See for example in Quebec, B Roy, “L’affectation des biens en droit civil Québécois” (2001) 103 R du N 383 at 426-427, and in France, P Berlioz, “L’affectation au cœur du patrimoine” (2011) 12 RTDCiv 635. 74 Gretton (n 5) at 100. 75 According to Professor Macdonald, there is division at the moment property does not fall under the common pledge of creditors. See Macdonald (n 1) at 778 ff. 76 See CCQ, art 625, 780. 77 Art 1223 CCQ. 78 Art 414 ff CCQ. 79 The new individual enterprise with limited responsibility in France is the best example. See Conseil Supérieur de l’Ordre des Experts-Comptables, L’entrepreneur individuel à responsabilité limitée, available at http://www.eirl.fr. 80 In German, these types of patrimonies are called Sondervermögen, Sonder meaning special and Vermögen meaning aptitude/capacity and estate (patrimony). 81 In Quebec for instance, article 2645 CCQ, which codifies the common pledge of creditors, clearly states that the performance of an obligation will not affect property that is the object of a division.



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only submitted to a different regime. It is simply as if the person held many containers, many capacities, each having its own purpose and creditors.82 A trustee in Scotland is exactly in this position. He is the owner of the trust property which is in a separated patrimony distinct from his own patrimony. Although he is the owner of the property for the duration of his office, he is not personally liable for any debt that follows from the trust. Trust beneficiaries and creditors have personal rights against him as a trustee but these rights are only enforceable against the trust patrimony. The trust patrimony is kept separate as a universality, through the mechanism of real subrogation. The problem underlined by Professor Smith in common law concerning change of trustee or bankruptcy becomes less problematic. The patrimony as a legal universality is transmissible. This understanding is not really revolutionary. In fact, Aubry and Rau acknowledged the existence of other forms of legal universalities apart from patrimony in their subjective elaboration of the theory of patrimony. Succession (which is also known in Quebec law as the patrimony of the deceased)83 is, among other things,84 in Aubry and Rau’s theory not understood as a patrimony but as a universality of law “that can be distinguished from the patrimony”: Although the patrimony is, in principle, one and indivisible, our Law nevertheless recognizes the existence of certain other universalities of law that must be distinguished from it. It is thus that the property within a succession is, in some respects, separated from the patrimony of the heir due to the benefit of inventory or separation of patrimonies even though the property remains, in reality, part of the heir’s patrimony.85

Aubry and Rau, even if advocating for unity and indivisibility of patrimony, accepted certain contractions to their absolute theory. Yet, it must be underscored that for them, patrimony and legal universality were not the same idea. There was only one patrimony that represented the person and the legislator had the power to create other forms of legal universalities within it. However, a major distinction between the subjective theory and the objective theory is that, for objective theory scholars, patrimony is just another legal universality. Personality is thus a purpose amongst others. It is this

82 Recall the image of suitcases used by Professor Gretton to describe trust in Scottish law. Gretton (n 5) at 100. 83 Art 625 CCQ. 84 They also name division with respect to the nature of the thing, the property of an absentee, inalienable property and fideicommissum. 85 Kasirer (n 35) at 181.

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fusion between personality and purpose, patrimony and legal universality, that allows the envelope to be pushed even further and create the possibility of having patrimonies bereft of personality. Abstraction is infinite. Thus, at the other extreme of the objective theory, we find patrimonies without holders, what the Germans call the Zweckvermögen, literally the purpose patrimony, and what the Civil Code of Québec has called patrimonies by appropriation. Here, the patrimony is completely autonomous and distinct from one emanating from personality. The rights, appropriated to a purpose, do not have any titularies who have a personal interest in them.86 This way of understanding patrimonies is quite controversial87 as it breaks the classical understanding of subjective rights. Rights in this instance do not have holders but mere administrators, whose prerogatives have been stripped to mere powers88 and who are never liable personally for the debts of the patrimony. With this way of understanding purpose patrimonies, property can literally belong to something.89 The patrimony continues to be a legal universality where property and debt answer each other, yet no one has a title to it. Patrimonies by appropriation are right-and-duty-bearing units with no legal personality, no titularies. The nature of both the container and the content have shifted here. The patrimony is a universality but the rights and liabilities it contains are not subjective or personal. Their nature is otherwise. They are purely patrimonial. E. THE PATRIMONIAL SHIFT The revision committee’s turn to patrimony for understanding the trust in Quebec was a bold initiative, moving away from the trust as an implant that was contaminating the law, to the trust as a fundamentally civilian institution. Yet, although patrimony is a truly civilian notion, as we have seen it is not an easy concept to grasp. From a heuristic theory it became a fundamental legal notion and even a legal prescription: contrary to the situation in Scotland, everyone in Quebec is now the holder of a patrimony. However the nature of this patrimony is not well defined and more importantly challenged by the introduction of trust as patrimony by appropriation in the 86 On the possibility of having rights without holders, see K H Neumayer, “Les droits sans sujet” (1960) 12 RIDC 342. 87 It does have defenders. In French law, see for example Duguit, L’état (n 56); or G Plastara, La notion juridique de patrimoine (thesis) (1903). 88 M Cantin Cumyn, “Le pouvoir juridique” (2007) 52 McGill LJ 215. 89 See Michoud, Théorie de la personnalité morale (n 55) 39.



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code. Patrimony seems to mean at once mere mass of property, economic mirror of personality, and a legal universality that, when pushed to the limits of its abstraction, reassembles rights and obligations whose nature, when we are talking about rights without holders, is difficult to grasp. In fact, the legislator in Quebec had to change its understanding of what property is to accommodate its new abstraction. According to article 915 Civil Code of Québec: 915. Les biens appartiennent aux personnes ou à l’État ou font, en certains cas, l’objet d’une affectation.

915. Property belongs to persons or to the State, or in certain cases, is appropriated to a purpose.

Accepting that property is not only rights that belong to a person is a major shift in the civilian imagination.90 Rights, for their part, have now to be understood in two different manners: either they are subjective, that is exercised in their holder’s own interest, or they are without holder and exercised by a person assigned for that purpose, the trustee. The rights are still patrimonial, that is, they still belong to a patrimony and are still of pecuniary value, but they are not necessarily subjective. And what about obligations? How can obligations still be understood as a juridical relationship between two persons if the property on which they will be executed belongs to no one? Depersonalising patrimony and property implies inevitably depersonalising obligation. Personal rights become pure patrimonial rights where only value is the key. Obligation is not to be understood as a personal relationship but as a patrimonial relationship in which the persons involved are just administrators. Liability becomes a patrimonial concept. The juridical person is the one that suffers the most from this patrimonial shift. As Lepaulle preached, with the insertion of patrimony by appropriation as a way to hold rights, personality becomes a mere juridical technique among others. The paradox here is that the new Code saw its mission as one where the person was to be repositioned as the fundamental idea behind the law. The Civil Code revision officers wanted to re-centre the law around the

90 One that was anticipated by Lepaulle and his own vision of rights “rights have two ways of being: either they belong to a legal person, or they are affected, so that legal person and affectation are like the two foci of the ellipse that encloses the whole juridical plan”, Lepaulle, Traité (transl, Ch 2 above) (n 24) at 40-41.

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person away from ownership.91 By adopting patrimonies by appropriation in the Code, the legislator seems to have put this idea in parentheses. The attraction of modernity was probably too strong. The understanding of trust as patrimony in Quebec marks thus a fundamental shift: patrimoniality seems to have become a central consideration, at the expense of personality;92 subjective rights have been replaced by patrimonial rights. Hence, it seems that in its patrimonial attire, the trust plays a major role in the actual architecture of the Civil Code of Québec: it introduces a completely new patrimonial regime. *** The story of trust as patrimony in Quebec’s positive law was an occasion to reflect on the trust in civil and mixed jurisdictions. At the same time, it allowed us to go back to the idea of patrimony and forced us to assess what really lies behind the word. It is to be hoped that unpacking it helped us see that trusting patrimonies blindly is not an option. The patrimony wears many hats – maybe too many –, but at least as many as the trust. The centrality they both have acquired in civil law today exemplifies their value as fundamental legal institutions. Trust and patrimony are now and forever intertwined in a shared history.

91 P-A Crépeau, La réforme du droit civil canadien. Une certaine conception de la recodification 1965-1977, (2003) 40. 92 C B Gray, “Patrimony” (1981) 22 C de D 81 at 83.

10  Dual Patrimony Dutch Style: The Magic Spell for Introducing the Trust in the Netherlands? Emile Schmieman*

A. GENERAL INTRODUCTION 222 B. OBSTACLES FOR THE INTRODUCTION OF A TRUST IN THE NETHERLANDS 222 (1) Indivisibility of ownership 222 (2) Statutory prohibition of fiduciary transfers 223 (3) Creditors have recourse to all the debtor’s assets 226 (4) Paritas creditorum 226 C. THE OBSTACLES MITIGATED 227 (1) Introduction 227 (2) The Sogelease case: prohibition of fiduciary transfer is not absolute 227 (3) The interest of the beneficiary seen as a limited proprietary right 228 D. REMOVING THE OBSTACLES: SEPARATE PATRIMONY AS A NEW SOLUTION 229 (1) Introduction 229 (2) The shift to the concept of separate patrimony 229 (3) Examples of separate patrimonies currently existing in Dutch law 231 E. REMAINING ISSUES THAT WILL NEED TO BE GIVEN THOUGHT WHEN INTRODUCING A TRUST 237 (1) Introduction 237 (2) The name of the new institution 237 (3) How to incorporate the separate patrimony in the law 237 (4) The creation of a separate patrimony 238 * LL M; Senior Legal Counsel in the Directorate for Legislation and Judicial Affairs (Private Law Section) of the Netherlands’ Ministry of Security and Justice; Researcher in the Business and Law Research Centre of the Faculty of Law, Radboud University Nijmegen. Unless otherwise indicated, the translations from Dutch are the author’s own.

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(5) The potential negative impact on creditors 238 (6) The separation of the trust assets from the trustee’s personal assets 239 (7) The trustee’s power to dispose of the trust assets 240 (8) Other issues 242 F. CONCLUDING REMARKS 243 A. GENERAL INTRODUCTION Trusts have long been considered to be contrary to the Netherlands’ legal principle of numerus clausus of rights in rem. For this reason, the introduction of a trust has been regarded as impossible for many years. This chapter will discuss the possibility of conceptualising a Dutch trust using the dual patrimony theory, that is, the concept where a person, natural or legal, holds two patrimonies that are distinct from each other. In Dutch law, however, the term “dual patrimony” would cause great confusion: the principle is that a person can have only one patrimony, to which all his assets belong. However, a part of that patrimony can be – to remain close to Dutch legal terminology – separate from the rest. This means that the person’s private creditors cannot recover their debts from these assets. For this reason, in the following, I prefer to use “separate patrimony” instead of “dual patrimony”. First, the main obstacles in Dutch law for the introduction of a trust will be set out. Second, it will be explained how these obstacles have been partly overcome over the years and how the doctrine of separate patrimony could possibly lead to a definitive solution. Several instruments leading to a separate patrimony will be described. Third, some issues that could arise even if the trust were considered to be a separate patrimony will be touched upon, and a possible solution will be proposed. It is concluded that the doctrine of separate patrimony might be a good step in the right direction, but several other steps will need to be taken for the trust to be introduced in the Dutch Civil Code. B. OBSTACLES FOR THE INTRODUCTION OF A TRUST IN THE NETHERLANDS (1) Indivisibility of ownership In the continental view, the division of ownership rights into legal ownership and equitable ownership is considered an essential element of the trust and



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is generally characterised as “dual ownership”.1 In the old continental legal tradition, dual ownership was not uncommon. For example, in the case of usufruct, it was distinguished between “inferior ownership” or dominium utile and a “superior ownership” or dominium directum. Around 1860, a debate on dual ownership came up in Germany, which was to a large extent a consequence of the rediscovery of the abstract and unitarian Roman law concept of ownership.2 At the end of the nineteenth century, the German legislator decided to re-introduce the Roman law concept of ownership. Ever since, this concept of ownership characterises most continental legal systems, including that of the Netherlands. In this country, ownership is considered to be absolute, all encompassing and “indivisible”.3 Dutch law has a numerus clausus of proprietary rights: only rights in rem explicitly acknowledged by the law can be proprietary rights. It is assumed that the trust creates a proprietary right that does not fall within the existing rights. (2) Statutory prohibition of fiduciary transfers (a) Introduction One of the main obstacles considered to stand in the way of the introduction of a trust in Dutch law is the prohibition of fiduciary ownership that was introduced in 1992, when the current Dutch Civil Code, Burgerlijk Wetboek (BW) entered into force. The current BW replaced the Burgerlijk Wetboek of 1838, which was to a very large extent a copy of the Napoleonic Code. One of the objectives of the new BW was to restore the balance between the rules stated in the law and those following from court decisions, which had got lost under the old Civil Code.4 Professor E M Meijers, its architect and main drafter, predicted that the new BW that was about to be introduced would be admired in England.   1 See D W A Aertsen, De Trust. Beschouwingen over de invoering van de trust in het Nederlandse Recht (thesis), Series Onderneming en Recht, vol 29 (2004) 65.   2 See T H D Struycken, De numerus clausus in het goederenrecht (thesis), Series Onderneming en Recht, vol 37 (2007).   3 Article 5 paragraph 1 Burgerlijk Wetboek (Netherlands Civil Code) stipulates that ownership is the most far reaching right over a thing a person can have.   4 See the Parliamentary History of Book 6 BW at 26; and W J Snijders, “Nog een duit in de zak van de trust”, in S C J J Kortmann, N E D Faber, A A van Rossum and H L E Verhagen (eds), Onderneming en 5 jaar Nieuw Burgerlijk Recht, Series Onderneming en Recht, vol 7 (1997) 87 at 95 and W J Snijders, Wetgevende geschriften (1991) 95 ff.

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Meijers expected that English law would follow the model of the BW and, at some point, discard Equity. This, in his opinion, would be the end of the institution of the trust as well. Meijers wrote: It is my strong opinion that the English property law, in its constructions and in many of its rules, lags some centuries behind of the continental European systems. It is a collection of obsolete, nowadays very impractical notions and downright foolish fictions that will astonish no man more than the Englishman himself as soon as he abolishes them. Before that very moment, no man will dare to criticise the institutions of common law or of equity. Without a doubt, it will take a very long time before these are abolished, but this is a mere consequence of the fact that in private law there is a reluctance to exchange the old case law for a completely new modelled statute-law.5

(b) Old Burgerlijk Wetboek (Civil Code): fiduciary ownership is allowed Under the previous BW, fiduciary ownership was a widely used instrument to create security over movable assets.6 The reason for that was that the creation of a right of pledge over goods required dispossession of the pledgor. This was considered to be rather burdensome in cases where the goods were needed for the pledgors’ business. Since in the Netherlands a transfer of ownership is possible by way of constitutum possessorium, by using the instrument of fiduciary ownership and transferring the goods to a secured party, there was no necessity for them to be taken out of the business of the pledgor. The validity of the fiduciary ownership contract was confirmed by the Netherlands Supreme Court, the Hoge Raad, as early as 1929.7 Later, the Hoge Raad ruled that if the transfer did not serve any other purpose than to provide the new owner with a security right, the fiduciary owner was obliged to sell the relevant asset upon a default of the borrower and was not allowed to keep the asset. The proceeds of the sale exceeding the sum of the credit were to be returned to the borrower. A fiduciary owner should not have more rights in relation to the goods than those which the holder of a pledge would have had in relation to those goods.8

  5 E M Meijers, WPNR 2998 (1927) 414.   6 Cf R M Wibier, “Can a modern legal system do without the trust” (2011) 5 LFMR 37.   7 Hoge Raad 25 January 1929, Nederlandse Jurisprudentie 1929/616 (Bierbrouwerij). In this case, the complete inventory of a bar served as a security for a loan granted by Heineken Breweries to the owner of the bar. Instead of using the right of pledge, the parties transferred the inventory to Heineken.   8 Hoge Raad 3 January 1941, Nederlandse Jurisprudentie 1941/470 (Boerenleenbank/Los).



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(c) Fiduciary ownership develops into “dual ownership” In this way, as Wibier9 put it, fiduciary ownership evolved into a hybrid form of ownership, the fiduciary owner being the legal owner of the good, but under certain restrictions. Those restrictions corresponded with the rights of the transferor, most importantly, the right to recover the goods upon payment of his debt and the right to receive the excess proceeds upon sale in case of default. Professor Meijers, who was a firm supporter of the idea of indivisible ownership, held a very unfavourable view of the fiduciary ownership. This led him to be equally reluctant to accept the mere idea of the trust. He wrote: The English notion that, he who manages property for the benefit of another and has the right to dispose of that property qualifies as the legal owner, is without a doubt inferior to our view that the person for whose benefit the property is being administered is the exclusive owner of that property.10

Nevertheless, Meijers realised that, in case of a pledge, the requirement to take the goods out of the possession of a pledgor was not very practical and rather burdensome. In order to solve this problem, he introduced in the new BW the possibility to create a non-possessory right of pledge leading to the pledgor being able to keep the goods in his possession.11 (d) New Civil Code: fiduciary transfer is prohibited Meijers was deeply convinced that, with the possibility to create a nonpossessory pledge legally recognised, fiduciary ownership was no longer needed. Consequently, he decided to introduce a provision designed to eradicate once and for all this institution he thought so low of. Article 3:84 paragraph 3 BW was drafted, stating that a legal act that has as its purpose to transfer a good for security purposes or that does not have the intention for the good transferred to form part of the transferee’s estate is not a valid title for the transfer of the good. Since the BW requires a valid transfer following a valid title, any transfer contrary to article 3:84 paragraph 3 BW is void.

  9 Wibier (n 6). 10 Meijers (n 5) 414. 11 Article 3:237 para 1 BW. See Wibier (n 6) 38.

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(3) Creditors have recourse to all the debtor’s assets Article 3:276 BW states that a creditor has recourse to all assets owned by the debtor, unless the law provides otherwise. This provision is another alleged obstacle to the introduction of the trust in the Netherlands. As a consequence of the principle of indivisibility of ownership and the prohibition of fiduciary transfer following from it, the beneficiary of a trust would merely acquire a contractual right against the trustee. Such contractual right would be only personal, rather than in rem. It is only enforceable against the counterparty (the trustee), and not against third parties. It does not have to be recognised by a third party who has, according to article 3:276 BW, recourse to the trustee’s assets, and would thus not give the trust beneficiary any kind of priority in relation to this third party, which is, if I see it correctly, an essential element of the trust in other jurisdictions.12 (4) Paritas creditorum Article 3:276 BW leads to another important rule that is considered to stand in the way of introducing a trust in the Netherlands: article 3:277 paragraph 1 BW.13 This provision states that creditors have equal rights to be paid out of the net proceeds of the assets of their debtor on a pro rata parte basis, except for rights of priority recognised by law. By virtue of this provision, creditors in principle have an equal ranking. Whereas Meijers’ main objection to the trust came from his strong views against ownership that was only of a temporary nature and thus was not to be considered as real ownership,14 Professor W Snijders, who succeeded Meijers in the drafting of the new Civil Code and brought it to completion, considered the paritas creditorum of article 3:277 paragraph 1 BW as one of the main obstacles in the way of the trust. He writes: I have stressed that the creation of a separate patrimony, for reasons that need not be explained again, entails that for some creditors a position is created in which they are not affected by bankruptcy. This goes at the expense of other creditors, which is contrary to the system of our law and the principle of paritas creditorum that is at its base.15 12 For explanations of the beneficiary’s rights under the common law trust see P Matthews (Ch 4) and K Reid (Ch 6) in this volume. 13 Wibier (n 6). 14 W J Zwalve, “Regelgeving in het vermogensrecht” (2009) 2009-1 RM Themis 20 at 24-25. 15 Snijders (n 4) at 95.



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In the light of the obstacles explained in this section, subsequent Dutch Ministers of Justice responded to Parliamentary questions on the subject that there was no room for introducing a trust in the Netherlands. C. THE OBSTACLES MITIGATED (1) Introduction Over the years, the obstacles that were long time considered to stand in the way of a Dutch trust have become less controversial, due to developments in case law and legal scholarship, and the issuance of various financial markets regulations requiring separation of patrimonies. (2) The Sogelease case: prohibition of fiduciary transfer is not absolute The debate on the validity of fiduciary transfers reignited under the new BW. In the famous Sogelease case,16 a company, De Zaaiers, bought printing equipment from another company, Mahez. Mahez transferred the machines to De Zaaiers. De Zaaiers, in turn, sold the machines to Sogelease in a sale and lease back transaction. The transfer to Sogelease was effected by way of constitutum possessorium, so De Zaaiers was able to continue using the machines. It was agreed that the consideration for the sale would be Sogelease paying the price for the machines to Mahez, on behalf of De Zaaiers. De Zaaiers was to pay a monthly lease price to Sogelease. All risks, such as those related to maintenance or repair, were to be incurred by the lessee, De Zaaiers, which would also put the machines on its balance sheet. In addition, it was agreed that in case of default of De Zaaiers, Sogelease would be entitled to dissolve the lease contract, which would entail that Sogelease, as the owner of the machines, would be able to sell them to any other party. Two years after the contract was concluded, De Zaaiers went bankrupt. A dispute arose on whether the machines still belonged to the estate of De Zaaiers. If so, De Zaaiers’ creditors had a claim against them. The bankruptcy administrator argued they did, since the transfer to Sogelease was to be considered a fiduciary transfer, contrary to article 3:84 paragraph 3 BW. The consequence of this would be that there was no valid transfer and the machines were still in the estate of De Zaaiers. 16 Hoge Raad 19 May 1995, Nederlandse Jurisprudentie 1996/116 (Keereweer q.q./Sogelease).

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The Hoge Raad ruled that pledge and mortgage are instruments specially designed to enable the creditor to satisfy its claim by selling the secured assets. The creditor has to return the excess proceeds to the debtor. If the transfer was only meant to create the same result without making use of pledge or mortgage, it would be considered a transfer for security purposes and therefore not a valid title for the transfer. The consequence of this would be that the machines would still be part of De Zaaiers’ estate. The Hoge Raad, however, mitigated the prohibition of fiduciary transfers. It ruled that in order for the transfer to be valid, it is decisive whether the parties chose to transfer the asset to the creditor without any limitation. According to the Hoge Raad, this is the case in a sale and lease back transaction, especially when the lessor only has to dissolve the lease contract in case of default of the lessee in order to be able to dispose of the asset freely and without limitations and no explicit permission of the lessee is required for that. (3) The interest of the beneficiary seen as a limited proprietary right In the decade before the introduction of the new BW, and in the years after that, some Dutch scholars tried to find ways of conceptualising the trust in a way that would make it compatible with Dutch law. Uniken Venema tried to replicate the division between legal ownership and equitable ownership characteristic of the English trust, using concepts already existent in the Dutch property law. In his first attempt, Uniken Venema stated that the concept of dual ownership could be constructed by using the concept of a “mother right” of which other, limited, rights derive. In his opinion, the proprietary character of a beneficiary’s right was based on his contractual rights, which third parties were bound to respect.17 In this view, the trustee, who is the “legal owner”, could be considered as the owner in the continental sense of the word, whereas the beneficiary has what would be called in Dutch terminology a “limited right” comparable to usufruct, pledge or mortgage. This view takes away the obstacle of the indivisibility of ownership. However, the beneficiary’s right remains problematic: it is difficult to translate it to one of the limited rights in rem acknowledged in Dutch law.18 Zwalve explains this: 17 C AE Uniken Venema, WPNR 5728 (1985) 115. 18 Struycken, De numerus clausus (n 2) 517.



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All limited proprietary rights, as is the case for the remaining part of the “mother right”, lead to there being a mix of “limited interest” in combination with a “limited power”: usufruct, pledge and mortgage all encompass a part of the power over the goods that are the object of those rights, such in combination with a part of the interest in those goods. A striking characteristic of “equitable rights” is that those can embody the full interest in an asset, whereas the power over that asset is in the hands of him having the legal interest over that good. None of the continental limited rights provides for this.19

D. REMOVING THE OBSTACLES: SEPARATE PATRIMONY AS A NEW SOLUTION (1) Introduction In the approach proposed at first by Uniken Venema, a new variety of proprietary right would have to be created, that would be different in nature from the limited rights in rem already recognised by the law. This would in any case have meant an erosion of the still generally accepted numerus clausus that is at the base of the BW. Such an erosion would, as Struycken put it, not be acceptable.20 (2) The shift to the concept of separate patrimony For that reason, another approach to the trust was needed. Uniken Venema made a second attempt. He was one of the first to stress that the main characteristic of a trust is that a trustee’s personal creditors cannot claim against the assets that form part of the trust. In this approach, the nature of the beneficiary’s rights does not matter. His rights are protected by the circumstance that the trust assets are separated from the trustee’s private patrimony. He writes: The concept of separate patrimony as a characteristic of the trust can, as such, be a fundament for the “external effect” of a trust towards the trustee’s creditors, without it being necessary to qualify the rights concerned as proprietary rights.21

Although, in his capacity as one of the founding fathers of the current BW, he was critical of the concept of the trust, Snijders was one of the next 19 W J Zwalve, Common Law en Civil Law (2000) 95-96. 20 Struycken, De numerus clausus (n 2) 517. 21 C AE Uniken Venema, “Trustrecht in beweging”, in G J Niezen, M J C G Raaijmakers and A J S M Tervoort (eds), Ongebonden recht bedrijven, Bedrijfsjuridische opstellen op de grens van het derde millenium bij gelegenheid van het 70-jarig bestaan van het Nederlands Genootschap Bedrijfsjuristen (2000) 247.

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authors to propose the doctrine of separate patrimony as a new approach to a Dutch trust. He wrote: The prohibition of fiduciary transfer of article 3:84 paragraph 3 definitely stands in the way of the introduction of a trust, if this instrument is seen as division of ownership between two persons […] Because of a lack of clear distinction between the law of goods and the law of contracts in common law and the peculiarities of the trust that derive from that, it is very hard to imagine how a division between legal ownership and equitable ownership should look in Dutch law. It does not seem very attractive to try to fit the trust into Dutch law. However, this is not necessary if a different approach is chosen, in which the essential element of the trust is the creation of a separate patrimony, with effect against third parties, i.e. the trustee’s personal creditors.22

With this statement, Snijders followed Kortmann, who wrote: I agree with the opinion that the trust is an instrument that has its foundation in a legal tradition in which the way things are seen differs very much from the continental tradition, of which the Netherlands forms part. […] This, however, does not mean that the trust cannot be made to fit into our civil law. If we wanted to introduce a trust in the Netherlands, we should see not if the trust itself can be introduced, but whether its functional characteristics fit into our system. If I see it correctly, one of the characteristic elements of the trust is that it creates a patrimony that is separated from the trustee’s private estate, without making the trust a separate legal person.23

An increasing number of authors are arguing that if a trust were to be considered a separate patrimony, and the trustee were to have the only and full legal title to the assets administered, the transfer of assets to a trustee would have the effect of a real transfer.24 This would lead to the trust being compliant with the statutory prohibition of fiduciary transfers and would not run counter to the principle of absolute and indivisible ownership. This new way of seeing things has already led the island of Curaçao, situated in the Caribbean parts of the Kingdom of the Netherlands,25 to introduce a trust.26 22 Snijders (n 4) at 95. 23 S C J J Kortmann, “Past ‘de trust’ in het Nederlandse recht?”, in D J Hayton, S C J J Kortmann, A J M Nuytinck, A V M Struycken and N E D Faber (eds), Vertrouwd met de trust: Trusts and trust-like arrangements, Series Onderneming en Recht, vol 5 (1996) 169. 24 S C J J Kortmann and H L E Verhagen, “National report for the Netherlands”, in D J Hayton, S C J J Kortmann, and H L E Verhagen (eds), Principles of European Trust Law (1999) 195; Aertsen, De Trust (n 1), and lately myself: E Schmieman, “In Christel we trust: de trust als instrument voor vermogensscheiding bij derivaten”, in D Busch and M P Nieuwe Weme (eds), Liber Amicorum Prof mr drs C M Grundmann-van de Krol, Series Onderneming en Recht, vol 79 (2013) 609. 25 J de Boer, “De trust naar Curaçaos recht” (2012) WPNR 6926; and M Bergervoet and D S Mansur, “De Curaçaose trust in de praktijk” (2012) WPNR 6926. 26 The law (Landsverordening) introducing the trust entered into force on 1 January 2012



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Dutch law provides for a number of situations in which there is some kind of separation of patrimony, or some kind of separate patrimony is construed. Those examples will be set out below. A trust could, as we will see later on, be added to this list. (3) Examples of separate patrimonies currently existing in Dutch law (a) Bankruptcy (Faillissement ) The Dutch Insolvency law (Faillissementswet) dates back to 1893. It provides that the insolvent debtor has an insolvency estate and a personal estate. The insolvency estate in principle contains all the debtor’s assets and is administered by an administrator appointed by the court. However, a very limited part of the total estate, consisting of the debtor’s strict personal belongings (such as clothes or a computer necessary for work) is not comprised in the insolvency estate. Creditors can only claim against assets that are comprised in the insolvency estate. The assets that do not belong to the insolvency estate are excluded from the insolvency proceedings. The administrator cannot claim against these assets, for the benefit of the insolvency creditors. For this reason they are considered to be a separate patrimony.27 (b) The foundation (Stichting ) The foundation is a legal person that is very widely used to create a separate patrimony. Any natural or legal person can create as many foundations as he likes before a notary, and choose to become a director of one or several foundations.28 There are some limits to the use of the foundation for commercial purposes: distribution of assets and profits by a foundation is not allowed to those who are members of the foundation’s bodies (such as directors or members of the supervisory board) or to others. Other persons may benefit from distributions only if they are made for charitable or social pur-

(Landsverordening van 15 December 2011, Houdende aanvulling van Boek 3 van het Burgerlijk Wetboek met bepalingen inzake trusts, Publicatieblad 2011, A° 2011, no 67). 27 S C J J Kortmann, N E D Faber and J Biemans, “National report for the Netherlands”, in S C J J Kortmann, D J Hayton, N E D Faber, K G C Reid and J W A Biemans (eds), Towards an EU Directive on Protected Funds (2009) 334. 28 Article 2:286 paragraph 1 BW.

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poses.29 However, if there is proper consideration, payments are g­ enerally not ­considered to be a distribution.30 When assets are transferred to the foundation by its founder, the foundation obtains full ownership of those assets. Personal creditors of the person who has created a foundation and has transferred his assets to this foundation no longer have access to those assets. Neither do they have recourse to the foundation’s assets, unless they manage to void the transfer by way of the actio pauliana. In that case, the transfer is deemed not to have taken place. (c) Partnerships (Personenvennootschappen ) Dutch law does not provide for a general limited liability partnership. It provides, however, for general partnerships (vennootschap onder firma) and disclosed or undisclosed partnerships (maatschap). In both cases the partners are jointly and severally liable for acts concluded in the name of the partnership. In the case of a limited partnership (commanditaire vennootschap), there is a silent partner, the commandiet, who is only liable for the amount of the assets he has contributed, unless he performs acts of management. The assets brought together by the partners are considered to be jointly owned by all the partners. What is commonly owned by the partners would best be described as “the partnership estate”. Each of the partners is considered to have a share in this partnership estate. The legal provisions governing the partnership date back to 1838. Even though not stated expressly in those provisions, it is generally accepted that the partnership estate is separated from the private estate of the partners,31 which means that private creditors of the partners do not have recourse to the partnership estate.32 (d) Financial services regulation Dutch financial services regulation prescribes that financial instruments should be kept separate from the patrimony of the investment institution. This obligation follows from article 13 paragraph 7 of the Markets in

29 Article 2:283 paragraph 3 BW. 30 Cf M U M A Waeijer-Linders, WPNR 6848 (2010); and C A Schwarz, “Doel en strekking van het uitkeringsverbod”, in M L Lennarts, W J M van Veen and D F M M Zaman (eds), De Stichting, Kritische beschouwingen over de wettelijke regeling van een veelzijdige rechtsvorm (2011) 38. 31 Hoge Raad 18 December 1959, Nederlandse Jurisprudentie 1960/121 (De Gouw/De Hamer). 32 P R Smits, De externe gebondenheid van het vennootschapsvermogen (thesis), Series Mongrafieën vanwege het Van der Heijden Instituut, vol 3 (1969) 143 ff; and Kortmann (n 23) at 184.



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Financial Instruments Directive (MiFID).33 The objective of this provision is twofold. First, it aims to protect the clients of an investment company against the risk that the investment institution uses the financial instruments of the clients for its own account. Second, and more importantly, it aims to protect the clients of the investment company against the risk that, in case the investment company goes insolvent, its creditors claim against financial instruments belonging to the investment company’s clients. Article 13 paragraph 7 of MiFID is implemented in article 4:45 of the Act on financial supervision (Wet financieel toezicht, Wft). By virtue of this article the assets of an investment fund shall solely serve to pay claims arising from either liabilities relating to the administration and depositing of the investment fund or participation units. No other claims are recoverable on the assets of the investment fund.34 (e) The nominee account (Kwaliteitsrekening ) A nominee account is a bank account, maintained by the account holder, such as an advocate or a notary, in his capacity as mandatary for the benefit of one or more clients. The Hoge Raad decided that the amount represented by the balance of such an account is not part of the bankrupt estate of the account holder.35 The claim against the bank is considered to be a special case of a separate patrimony: the account holder’s personal creditors have no recourse to it.36 (f) Pre-registration of a sale of registered goods (Vormerkung ) In the Dutch causal system of title transfer, needs to be followed by a transfer consisting tration in the public registry.37 The sale itself same registry, but before the transfer.38 If a

the sale of registered goods of a notarial deed and regiscan also be registered in the pre-registration is executed,

33 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 amending Council Directives 85/611/EEC and 93/6/EEC and of Directive 2000/12/EC of the European Parliament and of the Council repealing Council Directive 93/22/EC, OJ L 145, 30.4.2004. 34 Article 4:45 paragraph 1 Wft states: “The capital of a common fund shall be used exclusively to cover claims ensuing from: (a) liabilities relating to the management and custody of the fund and (b) units”. 35 Hoge Raad 3 February 1984, Nederlandse Jurisprudentie 1984/752 (Notaris Slis-Stroom). 36 For an extensive description of the nominee account, see A Steneker, Kwaliteitsrekening en afgescheiden vermogen (thesis), Series Onderneming en Recht, vol 31 (2005). 37 Article 3:84 paragraph 1 in conjunction with article 3:89 paragraph 1 BW. 38 Article 7:3 BW.

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the buyer of the registered good is protected against the bankruptcy of the seller, since the seller’s creditors have no recourse to the good concerned, contrary to what would be the case under general law (article 2:277).39 For this reason it is argued that from the moment of the registration of the sale until the moment of transfer the registered good is a separate patrimony of the seller.40 (g) Fiducia cum amico (Fiduciaire eigendom) Kortmann and Verhagen state that the Dutch legal institution coming closest to the express trust is the fiducia cum amico.41 They explain that, in most cases, fiducia cum amico involves a transfer: the goods concerned are transferred to a person, the fiduciarius, for management purposes. As a consequence, the fiduciarius acquires the ownership of the goods and, therefore, has the power to manage and dispose of them, in other words, full ownership. The manager accepts the duty to manage the acquired goods for the benefit of one or more beneficiaries, who, in most cases, include the transferor. The fiducia cum amico was developed outside statutory law. Under the regime of the old BW it was considered valid by the Hoge Raad.42 Under the new BW, with its prohibition of fiduciary transfers, the question arose as to whether the fiducia cum amico remained valid. In the Sogelease judgment, as described above, the Hoge Raad decided that fiducia cum creditore was valid as long as the fiduciarius acquired full and undivided ownership. The claims of the beneficiaries can only be of a personal, obligational nature.43 The same applies in the case of fiducia cum amico. The certification is a special form of fiducia cum amico. The technique of certification is often used to protect a company against a hostile takeover or to guarantee that the founder of a company keeps his voting rights, while other persons, such as his children, get the economic rights (dividends). Certification entails that shares are transferred to a special purpose vehicle (mostly a foundation), which subsequently administers the shares and issues certificates to a group of certificate holders. The voting rights attached to 39 J W A Biemans, Rechtsgevolgen van stille cessie (thesis), Series Onderneming en Recht, vol 65 (2011) no 488. 40 J W A Biemans, “Tijd voor de trust” (2011) 2011/9 Nederlands Tijdschrift voor Burgerlijk Recht 505. 41 Kortmann & Verhagen (n 24). 42 Hoge Raad 14 June 1929, Nederlandse Jurisprudentie 1929/1424 (BUMA). 43 Hoge Raad 19 May 1995, Nederlandse Jurisprudentie 1996/119 (Keereweer q.q/Sogelease).



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the shares are exercised by the special purpose vehicle, while the economic rights are distributed to the certificate holders.44 Kortmann and Verhagen explain that an essential element of the fiducia cum amico is that the beneficiary has the economic interest in the assets whereas the fiduciarius is the legal owner. This is exactly the point where the analogy between the fiducia cum amico and the trust ends. As a consequence of article 3:276 and 3:277 BW, in the event of bankruptcy of the fiduciarius the assets are part of his estate and are available to his creditors. The assets thus do not form a separate patrimony. To mitigate this risk, and to create some sort of separate patrimony, Dutch lawyers often use an arrangement in which the assets are transferred to a legal person, in most cases a foundation. Unless its statutes provide otherwise, the foundation has no powers to enter into transactions from which considerable debts can arise. According to article 2:291 BW, foundations are only allowed to acquire real estate or to create a mortgage if their statutes provide for that. To reduce the bankruptcy risk even further, the assets to be managed are transferred to one legal person that serves as the fiduciarius, whereas the actual management is performed by another legal person, the administrator. In cases of certification, the BW contains a special provision to protect the certificate holders against bankruptcy of the special purpose vehicle. Article 2:359 BW states that the personal claims of the certificate holders are in certain circumstances reinforced with a right of pledge deriving from the law. This security interest protects the certificate holders against non-payment of what is owed to them by the special purpose vehicle. A consequence of this is that if the special purpose vehicle goes into bankruptcy, the certificate holders have more than a personal claim against the special purpose vehicle. (h) The statutory administration over assets (Bewind ) Another instrument that has been considered to be suitable for creating trust-like arrangements is the bewind, or statutory administration over assets. When assets have been placed under bewind, the statutory manager, the bewindvoerder, rather than the owner of the assets, has authority to act with respect to those assets. As Kortmann and Verhagen explain, the bewindvoerder is vested with the exclusive power to manage and dispose of the assets.45 44 See J M M Maeijer, G van Solinge and M P Nieuwe Weme, Asser-series vol 2-II* (2009) no 661. 45 Kortmann & Verhagen (n 24).

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The assets to be managed are not legally owned by the bewindvoerder. They remain in the estate of the beneficiary. However, the assets placed under a bewind constitute a separate patrimony within the estate of the owner. As far as his creditors are concerned, a special regime applies to the assets placed under bewind. For debts incurred by the bewindvoerder in that capacity, bewind creditors can claim against bewind assets. For other debts, they cannot claim against these assets. Bewind is not very practical for commercial and financial purposes. Whereas the original draft for the new BW provided general rules for a type of bewind to be created by the parties themselves, it is now only possible in cases where the law expressly provides for it. In general, bewind is only allowed in cases concerning family law and succession law.46 (i) The mandate (Lastgeving ) In a privative mandate the principal authorises his mandatary or agent to execute acts of management and acts of disposition in respect of one or more of the principal’s assets, either in his own name or in that of the principal. The consequence of the privative mandate is that the mandatary is exclusively authorised to execute acts of management and acts of disposition in respect of one or more of the assets of the principal. For the duration of the contract of mandate, the principal does not have the authority to manage the assets himself.47 In the privative mandate, the mandatary acts in his own name while dealing with a third party. The contract is concluded between the mandatary and the third party. When the mandatary is declared bankrupt, however, the principal can, by means of a declaration to the mandatary and the third party, cause the rights of the mandatary towards third parties to be transferred to himself.48 According to Kortmann and Verhagen, in this kind of indirect agency, a situation is created which is similar to the case where contractual rights are held in trust. In that case the contractual rights against the third party are owned by the agent. In the event of the agent’s bankruptcy, they will be transferred to the principal and thus remain unaffected by the bankruptcy.49

46 Article 1:378 ff BW, article 1:431 ff BW and article 4:153 ff BW. 47 Article 7:423 para 1 BW. 48 Article 7:420 para 1 BW. 49 Kortmann & Verhagen (n 24).



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E. REMAINING ISSUES THAT WILL NEED TO BE GIVEN THOUGHT WHEN INTRODUCING A TRUST (1) Introduction In the above paragraphs, it has been established that the concept of separate patrimony is not alien to Dutch law, and would create room for the introduction of a trust in the Netherlands. Hoewever, it would be too optimistic to conclude that this clears the way for creating a Dutch trust. Numerous issues would have to be solved, some of which I will describe in the following paragraphs. (2) The name of the new institution If a trust were to be introduced, the first question would be how it should be called. Since the word “trust” is widely known internationally, “trust” would be the most suitable name. Some would say this could lead to misunderstanding because, although the result is the same as that of a common law trust, the way it is achieved is different. However, the same approach has been taken in the Hague Trust Convention50 in which just some common characteristics of trusts have been set out. The same goes for the Scottish trust (multiple patrimonies), the Quebec trust (ownerless patrimony) or the South African trust (multiple patrimonies). (3) How to incorporate the separate patrimony in the law Another issue to be addressed is how the “trust” or separate patrimony would be defined in the law. A provision in the law could read something like this: A trust creates a separate patrimony that is owned by one or more trustees, and is managed by them for the benefit of one or more beneficiaries that can be identified.

In order to ensure that the goods which form part of the trust are “separated”, another provision would be essential, reading something like this: 1. The goods that form part of the trust are separated from the trustee’s private patrimony. Recourse can only be taken against them for liabilities deriving from the management of the goods or for those liabilities incurred by the trustee in his capacity as trustee. 50 Convention of 1 July 1985 on the law applicable to trusts and on their recognition.

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2. For liabilities that derive from the management of the goods or are incurred by the trustee in his capacity as trustee, recourse cannot be taken against the trustee’s private patrimony, unless the creditor was not or could not reasonably have been aware of the trustee acting in such capacity.

(4) The creation of a separate patrimony Yet another issue concerns the juridical act by which a separate patrimony can be created. Here, Snijders again touches upon the main problem. He writes: The question of where the ownership is situated, can be seen as a secondary. For those wondering how a trust can be introduced in Dutch law, the main question thus is not if the trust entails a division of ownership that is prohibited by law, but to what extent Dutch law allows for a separate patrimony to be created by unilateral or multilateral legal act.51

As we have seen above, Dutch law provides for the possibility of a separate patrimony to be created by unilateral legal act, notably in the case of a foundation. (5) The potential negative impact on creditors Even if the trust is considered to be a separate patrimony, an issue to be addressed is the potential negative impact on creditors’ rights. The establishment of a trust could lead to creditors having fewer assets to claim against. This would be problematic in the light of article 3:276 BW, which provides that creditors have access to all of the debtor’s assets, as well as in the light of article 3:277 BW, providing for the paritas creditorum. These issues have long been reasons not to introduce a trust.52 It is submitted, however, that article 3:276 BW does not constitute a problem. Article 3:276 BW contains a possibility for the law to provide otherwise. In addition, although article 3:277 BW provides for equal ranking of creditors, it nevertheless allows creditors to have a right of priority (preference) where this is recognised by the law. Article 3:278 BW, in turn, provides for

51 Snijders (n 4) at 94. 52 When the new BW was introduced, the Minister of Justice was asked if trust arrangements should be accepted. To this he answered: “The trust is an Anglo-American legal instrument that does not fit in the Dutch system with its numerus clausus of rights in rem. In the Anglo-American legal systems it is not always certain when, and with what consequences a trust can be created. In any case, the creation of a trust would entail that the principle of paritas creditorum could be eroded in a rather unclear manner.” Cf Parlementaire Geschiedenis Boek 3 BW (Inv. 3, 5 and 6) 1201, Kluwer 1990.



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these statutory preferences. It states that a preference derives from pledge, mortgage and other preferences indicated in the law.53 “Trust” could be a similar execption. Similarly to the cases of the creation of a separate patrimony discussed in section D above, creditors seeing their possibilities for recourse negatively affected could use the actio pauliana provided for by article 3:45 paragraph 1 BW. This provision states that if a debtor, upon the engagement in a legal act he was not obliged to perform, was aware or should have been aware that this legal act would negatively affect the assets available for recovery by his creditors, the said legal act is voidable by each creditor concerned. Article 3:46 paragraph 1 BW provides for several legal acts in which it is assumed that the debtor and the other contracting party knew or should have known that this would negatively affect the creditors’ possibilities for recourse. This is the case if (1) they were engaged upon by the debtor within a year before the actio pauliana is executed and (2) the debtor at that time was not yet obliged to do so.54 Insolvency law provides for a similar system.55 If a trust is introduced, one option to protect creditors would be to add to the “black” list of article 3:46 paragraph 1 BW the creation of a trust whereby the settlor and the trustee are one and the same person. In that way, the creditors of the debtor creating a trust, who see their possibilities for recourse negatively affected, could require the settlor to prove that the trust – and thus the obligation to separate the goods from his private patrimony – was created more than a year ago. If the trustor does not succeed, it will be assumed that the obligation to separate the goods arose less than a year ago. This, in turn, will lead to the assumption that the debtor knew or should have known that the separation of the goods was detrimental to creditors and thus to the separation being voidable. (6) The separation of the trust assets from the trustee’s personal assets Contrary to English law, in Dutch law a transfer of goods can only take place by a legal act between two parties. The consequence is that if the settlor and

53 E.g. article 3:382 BW (preference of the compensation of damages of the right holder of, e.g., usufruct if that right is cancelled as a consequence of execution), article 3:292 BW (preference of the creditor with a right of retention). 54 Article 3:46 paragraph 1 sub a BW. 55 Article 42 and following Bankruptcy Law (Faillissementswet).

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the trustee are different persons, the goods concerned will need to be transferred following the applicable legal requirements. However, if the same person is both settlor and trustee a transfer of the goods concerned cannot occur. This is where both the old dilemma of indivisibility of ownership and the principle that a creditor has recourse to all his debtors’ assets come into play. As long as the goods are not transferred, they are normally considered to be part of the personal patrimony and thus eligible for recovery by all creditors, except in the case of mortgage or pledge. A problem would arise where the goods belonging to the separate patrimony could no longer be identified, as is the case with money, grain, fluids or cattle. In that case, according to Dutch law, they would supposedly be part of the trustee’s private estate and thus eligible for recourse by his creditors.56 It is submitted that, to overcome this difficulty it would be sufficient to require the trustee to keep accurate records of the trust assets, and to keep such assets concerned separated from his own patrimony (for instance, by depositing the trust funds in a separate bank account). As mentioned above, the separation in principle does not affect the rights of creditors to claim against the trustor’s assets more than would be the case if a separate legal person had been created. In both cases, creditors can use the actio pauliana. (7) The trustee’s power to dispose of the trust assets (a) Introduction As a consequence of the principle of indivisibility of ownership, the trustee would have the full ownership of the trust assets. However, this would not entail his being free to dispose of the goods as he liked. In Dutch law, nothing would stand in the way of limiting to a certain extent the trustee’s power to dispose of the goods belonging to the separate patrimony. Conditions like this are common; for instance, they are found in the case of testamentary administration over assets. The boundaries of limiting the trustee’s power to dispose of trust assets would be set by the trust instrument. Since ownership normally entails that the owner is free to dispose of the goods as he wishes, it could be argued that the boundaries set by the trust instrument would entail a major limitation of the ownership right, and would thus be considered null and void. 56 See article 5:15 BW and Hoge Raad 12 January 1968, Nederlandse Jurisprudentie 1968/274 (Mulder/Texeira de Matos).



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However, if this is not the case, and the conditions or limitations for the disposal of the assets are allowed, a problem arises. As explained before, the BW provides for a causal system of transfer. For a transfer to be valid, article 3:84 paragraph 1 BW requires a valid title, and a transfer by a person who has the right to dispose of the good concerned. If the trustee is acting in breach of the conditions or limitations to which the disposal is subject, he cannot be considered able to dispose of the good. The result is that the transfer would be void. This would have serious negative effects for the third party who acquired the good concerned. It would thus be necessary to protect the third party. The interests of the beneficiary, however, should also be protected. Dutch law already provides for several rules of third party protection. The following paragraphs will show how some of these rules would operate in a trust context. (b) The trustee disposes of the assets contrary to limitations set in the case of non-registered goods In the case of a transfer of a movable, non-registered57 good by a person who does not have the right to dispose of such good, the normal rules of the BW would apply. From the main rule, stated in article 3:86 paragraph 1 BW, it follows that in the case of a transfer by a person who is unable to dispose of the good concerned, the transfer is valid if it is for consideration and the other party acts in good faith. From article 3:11 BW it follows that a person is considered to act in good faith if he did not know nor should have known the facts or the rules concerned. In the case of a trustee who disposes of a good contrary to limitations or conditions set for that, the third party who acquires the good will be considered to act in good faith if he did not know nor should have known that the trustee was not allowed to dispose of the good concerned by virtue of the conditions set in the deed or the contract. If this is the case, the beneficiaries remain empty-handed, unless the consideration is considered to be part of the separate patrimony. For that reason, a rule of substitution should be created.58

57 Registered goods are land, houses, registered ships and airplanes, and nominee shares. 58 See J B Spath, Zaaksvervanging, Series Onderneming en Recht, vol 55 (2010), no 222.

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(c) The trustee disposes of registered goods contrary to the limitations set in the trust document If the trustee disposed of a registered good or a debt that forms part of the trust, things would become complicated. Normally, article 3:88 paragraph 1 BW would apply. From this provision it follows that notwithstanding the fact that the person transferring such goods is unable to do so, the transfer is valid if the person acquiring the good is in good faith and if the circumstance that the transferor is unable to dispose of the good is not the consequence of the transfer by which he acquired the good being void. This provision would not be enough to protect a third party who is unaware of the fact that the trustee is acting in breach of the conditions or limitations for disposal of the goods. In that case, the trustee’s inability to dispose of the good is caused by those conditions or limitations, rather than by a previous invalid transfer. This situation would need to be clarified. This could be achieved by a legal provision stating that any condition or limitation of the trustee’s power to dispose of the goods cannot be held against a third party who was not aware nor should have been aware of it. Since in most cases the fact that a registered good is held in trust would be marked in the registry,59 this would protect the third parties. This would keep in balance the level of protection for ignorant third parties on the one hand, and that for the beneficiaries on the other hand. (8) Other issues As we have seen above, many issues would have to be addressed upon introducing a trust in Dutch law. However, this list is far from exhaustive. More practical details would also have to be considered, such as which persons could act as trustees. Should only financial institutions be eligible to do so, or should other legal persons or even common, natural persons be eligible to be appointed as trustee as well? In making a new law, one would normally want the new instrument to be as broadly usable as possible. However, with such a completely new instrument, there would be many arguments in favour of making it available to professional trustees only, at least in the beginning. This is not uncommon in other European countries, such as France.60 Another important question regards the fiscal treatment of the separate patrimony. For that, Dutch tax law contains provisions on foreign trusts that 59 Article 3:23 and 3:24 BW. 60 Article 2015 of the French Civil Code.



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basically come down to the assets being fiscally attributed to the settlor, which leads to the trust being fiscally transparent (afgezonderd particulier vermogen).61 These rules could be applied to a Dutch trust. F. CONCLUDING REMARKS Owing to the concept of indivisibility of ownership and the prohibition of fiduciary transfer deriving from it, the introduction of a trust in Dutch law has long been considered to be impossible. Meijers, the founding father of the current BW, completely rejected the very idea of a Dutch trust. Snijders, his successor, was merely sceptical. In recent years, general opinion has become more favourable to a Dutch trust. The concept of separate patrimony, which is not alien to Dutch law, has led to a new way of understanding the trust. The principle of indivisibility of ownership, however, still raises obstacles that need to be addressed. As discussed above, many other issues, some of which are of a rather practical nature, will have to be considered. Altogether, it is safe to say that, although the doctrine of separate patrimony offers a promising foundation, much water will have to pass under the bridge before a Dutch trust is born.

61 Article 2.14a Wet Inkomstenbelasting (Income Tax Law) 2001.

Index abstraction, 165, 171–2, 175–6, 207, 218, 219 actio pauliana, 157, 192, 232, 239, 240 action de in rem verso, 182, 191 affectation, 28–30, 34–6, 40–1, 46, 172 affected patrimony see patrimony by appropriation agency, trust as, 91–2 agents, 55–6, 236 America see United States Amos, Maurice, 89, 92 Aubry, Charles, 8, 63–4, 164–98, 209–10, 211, 216, 217 autonomous patrimony, 8, 102, 104–5, 125, 204–5, 215, 218 bankruptcy of business trusts, 56 and fiducia cum amico, 235 and fiduciary transfers, 227–8 and nominee accounts, 233 and patrimony, 64–5, 117, 193–4 and pre-registered sales, 233–4 and privative mandates, 236 of trustees, 49–50, 53, 74–7, 91–2, 95, 101–2, 113, 114–15, 117, 131 and trusts, 49–50, 56, 74–7, 91–2, 95, 101–2, 113, 114–15, 117, 131 bankruptcy estate, 30, 31, 49, 70, 74, 77, 98, 148, 227–8, 231, 233–4, 235 Bekker, Ernst Immanuel, 35, 204 Belguim, 68, 107 beneficiaries see estate beneficiaries; trust beneficiaries bewind, 92, 107, 113, 114, 122, 235–6 Bolivia, 111 breach of trust, 49, 71, 73, 91, 118, 123, 129, 131, 150 Bürgerliches Gesetzbuch (BGB), 63 Burgerlijk Wetboek (BW), 222, 223–7, 229, 234–5, 236, 238–9, 241–2 business trusts, 56, 149, 153, 154 Canada, 7, 8, 15, 44, 55–9, 104–6, 108, 111, 116, 119, 121, 130, 147, 151–2, 169–70, 173, 199–220

Cantin Cumyn, Madeleine, 7 Carnegie, Andrew, 19, 40 Catalonia, 15 Chafee, Zechariah, 15 cestuis see trust beneficiaries Charbonneau, Pierre, 204 charitable trusts, 18, 36, 45, 73, 77, 95, 120 Chile, 111 China, 111, 125 Civil Code of France see Code civil Civil Code of Germany see Bürgerliches Gesetzbuch (BGB) Civil Code of Lower Canada, 58, 170, 199, 206 Civil Code of Québec, 15, 44, 58, 63, 104–5, 116, 119, 121, 169–70, 199–205, 207, 212, 218–20 Civil Code of the Netherlands see Burgerlijk Wetboek (BW) clawback, 68 Code civil, 166, 170, 174, 176, 178–9, 181, 185, 187–8, 190–1, 195–6, 207, 209 Colombia, 111 community of property (between spouses), 180, 184–5 company law, 65–6, 120 constitutum possessorium, 224, 227 constructive trustees, 20, 156–7 constructive trusts, 20, 27, 30, 45 contracts, 38–9, 45, 90–1, 112–13 corporations, 56, 59, 65–6, 78, 104, 119–20, 138–9, 152–3, 154 Costa Rica, 111 creditors see estate creditors; personal creditors; tort creditors; trust creditors Curaçao, 230 Czech Republic, 15, 112 Dabin, Jean, 208–9, 210 Dalrymple, James, 1st Viscount Stair, 114 discretionary trusts, 95 domicile (trusts), 39–40 Draft Common Frame of Reference (DCFR), 4–5, 124–5

index dual ownership, 51, 88–9, 92, 110–11, 121–2, 173, 214, 222–3, 225, 228–9, 230 dual patrimony see separate patrimony Dutch Civil Code see Burgerlijk Wetboek (BW) Ecuador, 111 equitable title, 51–2, 88–9, 110–11, 121–2, 173, 222–3 estate see bankruptcy estate; estates of the deceased estate beneficiaries, 66–7, 70, 133–41, 156, 197–8 estate creditors, 134–40, 147–8 estate of the deceased, 9, 17, 53–4, 69–71, 98, 128, 133–48, 158 European Court of Justice, 96–7 European Union (EU), 5, 93, 96–7, 124–5 execution of judgments, 72–3, 75–6, 131 executors see personal representatives extrapatrimonial rights, 171, 178, 206, 215 factual universalities, 212, 213–14 fiducia cum amico, 90, 113, 234–5 fiduciary contracts, 66, 112 fiduciary heirs, 8, 143 fiduciary ownership, 82, 202, 223–5 fiduciary transfers, 223–5, 227–8, 230, 234, 243 financial services regulation, 232–3 floating charges, 158 foundations, 59, 66, 104, 231–2, 235 France, 7, 8, 14, 44, 63, 65, 68, 102–3, 107, 111–12, 125, 163–98, 207, 209, 242 Fratcher, William F, 88–9, 92, 110 fraud, 22, 23, 24, 91, 156–7 fraudulent conveyances, 156–7 future assets, 6, 63–4, 70, 71, 82, 178, 188 Gény, François, 165 Germany, 63, 65, 68, 103, 112, 223 Gloag and Henderson: The Law of Scotland, 79–80 Gretton, G L, 69, 78, 79, 80, 213 Guatemala, 111 Guernsey, 80 Hague Trusts Convention, 71, 88, 99, 103, 107, 115, 237 Hanbury, H G, 15 heirs see estate beneficiaries; fiduciary heirs; succession

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Henry VIII, 23–4 hereditary seizin, 195–8 Hoge Raad, 224, 228, 233, 234 Honduras, 111 Honoré, Tony, 102, 106, 115, 117 implied trusts, 30 inalienability, of patrimony, 187–8 indemnity (trustees), 9, 48, 54, 73, 150, 152 indivisibility of the Crown, 151–2 of ownership, 92, 114, 128–9, 222–3, 225, 230, 240, 243 of patrimony, 7–8, 32, 63, 79, 98–9, 130, 172, 173, 175, 179–82, 189, 210, 216, 217 of right of pledge, 192–3 of succession, 196–7 informality, of trusts, 52, 120–1 inheritance see estate beneficiaries; estate of the deceased; succession innate property, 171, 178, 187 insolvency see bankruptcy interests, 31, 32–5, 36, 200, 211 International Encyclopaedia of Comparative Law, 88–9, 110 Italy, 65, 125 Jallu, Olivier, 34 Jamin, Christophe, 166–7 Japan, 111, 125 Jersey, 80, 151 Jestaz, Philippe, 166–7 Jhering, Rudolf von, 34 joint tenancy, 77 Jones, Neil, 131–2 judgments, execution of, 72–3, 75–6, 131 Kortmann, S C J J, 230, 234–5, 236 Law Commission, 83 Lawson, F H, 89, 103, 108 legal personality and patrimony, 30–4, 40–1, 103–6, 168, 171, 178–9, 186, 209–11, 214–15, 219–20 and trusts, 7, 30–4, 40–1, 43, 53, 55–60, 107, 119–20, 202, 214–15 legal subjects, 7, 32–4, 36, 41, 57–8, 130, 215 legal title, 51, 88–9, 92, 110–11, 121–2, 173, 222–3

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legal universalities, 28, 31–2, 34–5, 172, 175, 177–81, 210–14, 217–18 Lepaulle, Pierre, 7, 8, 13–41, 43–7, 57–8, 60, 105, 116, 130, 204–5, 213–15, 219 Levy-Ullmann, Henri, 23 liabilities see personal liabilities; tort liabilities; trust liabilities Liechtenstein, 80, 102, 108, 111 limited liability companies, 65–6, 78; see also corporations Louisiana, 108, 111, 169 Lupoi, Maurizio, 8 Luxembourg, 68, 112, 125 Maitland, Frederic, 5, 174 mandate, 236 Meijers, E M, 223–4, 225, 226, 243 Mexico, 15, 43, 108, 111 Milsom, S F C, 51–2 Napoleonic Code, 8, 63, 66, 206 National Conference of Commissioners on Uniform State Laws (NCCUSL), 55, 56 nationality (trusts), 39–40 Netherlands, 92, 107, 125, 221–43 Netherlands Supreme Court, 224, 228, 233, 234 Nicaragua, 111 nominee accounts, 233 numerus clausus, 53, 113, 222, 223, 229 obligations and patrimony, 31–2, 34, 171–2, 192–4, 210, 213–14, 219 of trustees, 26, 36–7, 39, 41, 51–3, 59, 119, 130–2, 213 and trusts, 6, 26, 36–7, 38, 41, 51–3, 59, 90–1, 102, 119, 130–2, 213–14 office, trust as, 6–7, 106, 119, 215–16 ownership dual, 51, 88–9, 92, 110–11, 121–2, 173, 214, 222–3, 225, 228–9, 230 fiduciary, 82, 202, 223–5 indivisibility of, 92, 114, 128–9, 222–3, 225, 230, 240, 243 sui generis, 58–9, 201–2 see also proprietary rights Panama, 108, 111 paritas creditorum, 226–7, 238 partnerships, 20, 36, 41, 82, 232

patrimonial rights, 27, 172, 206, 210, 215, 219–20 patrimony as abstract, 165, 171–2, 175–6, 179, 180, 207, 218, 219 by appropriation, 30–5, 40–1, 43–6, 116, 130, 170–4, 199–200, 203–5, 212–13, 216, 218–20 Aubry and Rau on, 8, 63–4, 164–98, 209–10, 211, 216, 217 autonomous, 8, 104–5, 122, 173, 204–5, 215, 218 and bankruptcy, 64–5, 117, 193–4 and company law, 65–6 and domicile, 39–40 and estate, 9, 54, 69–70, 71, 98, 116–17, 143, 208, 216 as factual universalities, 212, 213–14 and future assets, 6, 63–4, 70, 71, 82, 178, 188 history of, 8, 63, 97–8, 206 inalienability of, 187–8 indivisibility of, 7–8, 32, 63, 79, 98–9, 130, 172, 173, 175, 179–82, 189, 210, 216, 217 and interests, 31, 32–5, 36, 200, 211 and legal personality, 30–4, 40–1, 103–6, 168, 171, 178–9, 186, 209–11, 214–15, 219–20 as legal universalities, 28, 31–2, 34–5, 172, 175, 177–81, 210–14, 217–18 and nationality, 39–40 and obligations, 31–2, 34, 171–2, 192–4, 210, 213–14, 219 personal, 7–8, 46–7, 69, 79–80, 116–18, 120, 124–5, 129, 229–30, 237–40 and proprietary rights, 186–92, 208–9 separate, 7–8, 46–7, 69, 72–3, 79–80, 98–103, 116–20, 124–5, 129, 140, 151, 156, 173, 215–17, 222, 229–40, 242–3 special, 7, 69, 79, 98–103, 105, 107, 116, 216 and succession, 66–8, 181, 194–8 trust, 7–8, 46–7, 69, 79–80, 116–18, 120, 124–5, 129, 230, 237–40 and trusts, 7–9, 27–35, 40–1, 43–60, 63, 68–84, 97–106, 116–18, 123–6, 129–32, 173–5, 199–205, 212–20, 222, 229–40 and will, 31, 32–3, 35–6, 38–9, 41, 209, 211 Paulian actions, 157, 192, 232, 239, 240 Penner, J E, 206

index personal creditors, and patrimony, 192–4 personal representatives, 140–1 trustees, 8, 19, 26–8, 46–7, 50, 68–9, 72–3, 77, 84, 113, 115, 117, 129, 156, 226–7, 229, 232–3, 238–40 personal liabilities estate beneficiaries, 66–7, 70, 197–8 personal representatives, 54, 70–1, 144 trustees, 9, 19, 41, 46–7, 54, 73–4, 115, 117–18, 130–1, 148–58, 213, 217 personal patrimony, 7–8, 46–7, 69, 79–80, 116–18, 120, 124–5, 129, 229–30, 237–40 personal representative, 54, 66, 70–1, 77–8, 134–7, 139–41, 142–8 personal rights estate beneficiaries, 140 and patrimony, 98, 219 trust beneficiaries, 5–6, 26, 38, 58–9, 69, 100–2, 114–15, 117, 122–3, 129, 155, 157, 202, 226 Peru, 111 petitions of heirship, 190, 192 Portalis, Jean-Étienne-Marie, 164 Pound, Roscoe, 14 pre-registered sales, 233–4 Principles of European Trust Law, 4, 102, 124 private creditors see personal creditors private patrimony see personal patrimony privative mandates, 236 Privy Council, 88, 92 proprietary rights and patrimony, 186–92, 208–9 trust beneficiaries, 5–6, 26–7, 37–8, 51–2, 92–8, 112–14, 122–3, 129, 132, 155, 173, 228–9 see also ownership Puerto Rico, 108 purpose trusts, 17, 77, 95, 200, 211–12, 215–18 Quebec trust, 7, 8, 57–9, 104–6, 111, 116, 119, 121, 130, 173, 199–220, 237 Radcliffe, Cyril, 1st Viscount, 134–7 Rau, Frédéric-Charles, 8, 63–4, 164–98, 209–10, 211, 216, 217 real obligations, 6 real rights see proprietary rights real subrogation, 7, 9, 32, 48, 73–5, 81, 99–101, 113, 172, 182–6, 212, 217 Reid, K G C, 69, 71, 78, 79, 80, 81, 213

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resignation (trusteees), 54, 118, 157–8 resulting trusts, 30 revendication, 19, 191–2 right of pledge, 187, 192–4, 224, 225, 235 rights in personam see personal rights rights in rem see proprietary rights Roman law, 21, 66, 67, 97–8, 102–4, 116, 142, 144, 189, 190, 195, 197, 206, 223 Romania, 7, 112, 125 Rudden, Bernard, 89 Russia, 111 Saleilles, Raymond, 3–4 Scots trust, 7–8, 46, 54, 57–9, 70, 78–80, 87–109, 110–26, 127–59, 173, 213, 215–17, 237 Scott, Austin, 5, 14 Scottish Law Commission, 123, 158 segregation of assets, 7, 8, 9, 27–8, 46–7, 65, 68–9, 71–2, 79, 115, 239–40 separate patrimony, 7–8, 46, 69, 72–3, 79–80, 98–103, 116–20, 124–5, 129, 140, 151, 156, 173, 215–17, 222, 229–40, 242–3 Smith, Lionel, 70, 74, 76, 206, 213, 217 Snijders, W, 226, 229–30, 238, 243 Sonneveldt, Frans, 103 South Africa, 102, 105, 106, 108, 111, 115, 237 South Korea, 111 special patrimony, 7, 69, 79, 98–103, 105, 107, 116, 216 Sri Lanka, 108, 111 Stair, Viscount see Dalrymple, James, 1st Viscount Stair Statute of Uses, 23–5 Steven, Andrew, 79 Stewart, Mackenzie, 114 stipulatio alteri, 90 Stone, Harlam, 5–6 Struycken, T H D, 229 subjective rights, 31, 34, 171, 176, 200, 202, 206, 209, 216, 218, 220 succession, 66–8, 142, 181, 194–8 sui generis ownership, 58–9, 201–2 supra-national legal institutions, 3–4 Supreme Court of Canada, 55, 58, 201–2 Taiwan, 111 taxation, 120 title see equitable title; legal title; ownership tort creditors, 154

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tort liabilities, 150, 154–5 tracing, 9, 80–1, 175 Treuhand, 21, 66, 101, 106, 112, 113 trust as agency, 91–2 as autonomous patrimony, 8, 104–5, 122, 173, 204–5, 215, 218 and bankruptcy, 49–50, 56, 74–7, 91–2, 95, 101–2, 113, 114–15, 117, 131, 148 business, 56, 149, 153, 154 charitable, 18, 36, 45, 73, 77, 95, 120 constructive, 20, 27, 30, 45 and contract, 38–9, 45, 90–1, 112–13 and corporation, 56, 78, 119–20, 152–3, 154 defining, 4–9, 25–35, 88–9, 110 discretionary, 95 and domicile, 39–40 duration of, 113 and estates of the deceased, 53–4, 69–71, 128, 133–48, 158 and execution of judgments, 72–3, 75–6, 131 features of, 17–20 fraudulent uses of, 22, 23, 24 functions of, 18, 19–20, 28–9, 108–9 guiding principles of, 28–9 history of, 20–2 implied, 30 informality of, 52, 120–1 intentions behind, 28–30 and legal personality, 7, 30–4, 40–1, 43, 53, 55–60, 107, 119–20, 202, 214–15 as legal subjects, 7, 58, 215 Lepaulle on, 13–41, 43–7, 57, 60, 105, 116, 130, 204–5, 213–15, 219 and nationality, 39–40 and obligations, 6, 26, 36–7, 38, 41, 51–3, 59, 90–1, 102, 119, 130–2, 213–14 as offices, 6–7, 106, 119, 215–16 and patrimony, 7–9, 27–35, 40–1, 43–60, 63, 68–84, 97–106, 116–18, 123–6, 129–32, 173–5, 199–205, 212–20, 222, 229–40 as patrimony by appropriation, 30, 34–5, 40–1, 43–6, 116, 130, 174, 199–200, 203–5, 212–13, 216, 218–20 purpose, 17, 77, 95, 200, 211–12, 215–18 Quebec, 7, 8, 57–9, 104–6, 111, 116, 119, 121, 130, 173, 199–220, 237

resulting, 30 Scots, 7–8, 46, 54, 57–9, 70, 78–80, 87–109, 110–26, 127–59, 173, 213, 215–17, 237 as separate patrimony, 7–8, 46–7, 69, 72–3, 79–80, 98–103, 116–20, 124–5, 129, 151, 156, 173, 215–17, 222, 229–40, 242–3 structure of, 35–41 and taxation, 120 trust beneficiaries claims against third parties, 19, 38, 51, 90–1, 123, 132 compared with estate beneficiaries, 133–41 personal rights, 5–6, 26, 38, 58–9, 69, 100–2, 114–15, 117, 122–3, 129, 155, 157, 202, 226 proprietary rights, 5–6, 26–7, 37–8, 51–2, 92–8, 112–14, 122–3, 129, 132, 155, 173, 228–9 rights in the trustee’s rights, 6, 50–2, 132 trust creditors, 9, 36–8, 46–50, 55, 73–7, 79, 91–2, 115, 117, 129, 131, 148–58 Trust Law Committee, 83, 151 trust liabilities (trustees), 9, 46–7, 53–4, 56, 115, 117 trust patrimony, 19, 36, 46–7, 69, 79–80, 116–18, 120, 124–5, 129, 230, 237–40 trustees and bankruptcy, 49–50, 74–7, 91–2, 95, 101–2, 113, 114–15, 117, 131 and breach of trust, 49, 71, 73, 91, 118, 123, 129, 131, 150 compared with personal representatives, 145–8 constructive, 20, 156–7 death of, 77–8, 119 delegation to agents, 55–6 and disposal of trust assets, 73, 121, 123, 156, 240–2 existence of essential, 45–6, 50, 52, 53 as holders of an office, 6–7, 106, 119, 215–16 indemnity, 9, 48, 54, 73, 150, 152 obligations, 26, 36–7, 39, 41, 51–3, 59, 119, 130–2, 213 personal creditors, 8, 19, 26–8, 46–7, 50, 68–9, 72–3, 77, 84, 113, 115, 117, 129, 156, 226–7, 229, 232–3, 238–40

index personal liabilities, 9, 19, 41, 46–7, 54, 73–4, 115, 117–18, 130–1, 148–58, 213, 217 resignation of, 54, 118–19, 157–8 role of, 18–19, 121 segregation of assets, 7, 9, 27–8, 46–7, 68–9, 71–2, 79, 115, 239–40 tort creditors, 154 tort liabilities, 150, 154–5 trust creditors, 9, 36–8, 46–50, 55, 73–7, 79, 91–2, 115, 117, 129, 131, 148–58 trust liabilities, 9, 46–7, 53–4, 56, 115, 117 Trusts (Jersey) Law, 151 Uniform Law Commission (US), 150 Uniform Law Commission of Canada, 56 Uniform Prudent Investor Act (US), 55 Uniform Statutory Entity Trust Act (US), 56 Uniform Trust Code (UTC), 150–1, 153–4, 156–8

249

Uniform Trustee Investment Act (Canada), 56 Uniken Venema, C AE, 228, 229 United States, 9, 14, 55–6, 108, 111, 150–1, 153–4, 169 universal succession, 54, 70, 106, 142, 144, 157–8, 195–8 universality see factual universalities; legal universalities usufruct, 29, 37, 186–7, 223, 228–9 Venezuela, 111 Verhagen, H L E, 234–5, 236 Weiss, André, 3 Wibier, R M, 225 will, 31, 32–3, 35–6, 38–9, 41, 209, 211 Wilson, Bill, 127–8, 140, 159 Windscheid, Bernhard, 34 Zachariæ, K S, 63, 167, 180 Zwalve, W J, 228–9 Zweckvermögen, 35, 104, 218