Chapter 6 – Private purpose trusts
General
77.Section 46 of the Act, which implements recommendation 70(1) as amended, defines a private purpose trust (which the SLC concluded can already be competently established under Scots law, see paragraph 14.3 of the Report on Trust Law). Such a trust contrasts with a “beneficiary trust”, which is a trust exclusively for the benefit of identified or identifiable beneficiaries. A private purpose trust, on the other hand, exists for the furtherance of a specific purpose which is neither charitable or public nor solely for the benefit of a specified or named beneficiary (or potential beneficiary)(16) (by subsection (1)). An example might be a trust set up by commercial developers to cover potential future environmental costs associated with the development. Such trusts are arguably already recognised under Scots law.
78.Subsection (2) clarifies that a private purpose trust may also have beneficiaries; thus an entrepreneur might transfer the shares in the entrepreneur’s company to trustees to hold, and to use to promote the interests of the company, for the ultimate benefit of the employees, or for future generations of the truster’s family. But in those circumstances the trust is not set up solely for those beneficiaries or potential beneficiaries.
Applications to the Court of Session
79.Section 47 of the Act implements recommendation 70(3). It allows any person with an interest in the purpose of a private purpose trust to apply to the Court of Session for an order requiring steps to be taken for the fulfilment of that purpose. There is already a right at common law for anyone with an interest in a Scottish public trust to seek enforcement of its purposes, and this section makes clear that the same principle applies to private purpose trusts.
80.Section 48 of the Act implements recommendation 70(4) and (5). It permits the Court of Session, on application, to reform a private purpose trust where the execution of the trust purpose has become, for example, impossible or impracticable. The remedies which the court may direct are set out in subsection (3) and are essentially twofold: either the court may direct that the property be held on trust for a different purpose, or (if that cannot be done) that it be disposed of as if the trust had failed, either in whole or in part. Subsection (4) states that the procedure is only available where the trust deed does not permit reform by other means, but otherwise the section as a whole is mandatory.
Supervisors
81.Section 49 of the Act, which provides for the appointment of a supervisor, implements recommendation 71(1) to (4). The main task of a supervisor is to ensure the proper implementation of the trust purposes, from the standpoint of those who may benefit from or have an interest in the trust. By subsection (1), the truster has a choice as to whether to provide in the trust deed for the appointment of a supervisor (or, by subsection (4), two or more). Subsection (3) provides that the supervisor must not be a trustee, and vice versa. Importantly, the duties of the supervisor are fiduciary and the supervisor is subject to a duty of care (by subsection (2)); in this respect the supervisor is on a par with a trustee. There is flexibility for the law to develop in this area to cater for the way that supervisors may be used. Subsections (5) and (6) empower the Court of Session to appoint a supervisor where one is required by the trust deed but, for one of the specified reasons, the court’s assistance is considered necessary.
82.Section 50 of the Act, which is a default provision, implements recommendations 43, 45 and 71(5) and (6). Its aim is to grant the supervisor the rights and remedies which are needed for the supervisor to be able to perform the task properly. Subsections (1) to (3) provide the supervisor with the certain rights which a beneficiary and a trustee would have under the trust. Subsection (4) adds that, in the event of breach of trust, the remedies which would be available to a beneficiary are also available to the supervisor. This section applies irrespective of when the trust was created.
83.Section 51 of the Act provides that the power of a court to remove a trustee (section 7 of the Act) and the provisions on decision making (sections 13 and 14 of the Act) apply to supervisors as they apply to trustees. The provisions on decision making will only be relevant where there is more than one supervisor in office at any given time. In such a situation, supervisors’ decisions will be regulated in the same way as decisions to be taken by trustees.
84.Section 52 of the Act implements recommendation 71(7) and provides that all supervisors have power to resign office. The resignation must be by notice in writing sent to the trustees, which takes effect on receipt(17). The exception to the power of resignation in section 52(1) of the Act is where a purported resignation is in order to facilitate a breach of trust; in such a case any notice is of no effect. This is broadly similar to the position of trustees at common law, where a resignation in order to facilitate a breach of trust is likely to result in the trustee still retaining liability flowing from the breach.
The singular including the plural here by virtue of the Interpretation and Legislative Reform (Scotland) Act 2010.
See section 26 of the Interpretation and Legislative Reform (Scotland) Act 2010 for the interpretation rules on the service of documents.
