Prepare a power point slide explaining the following information to your class:
ummarise the information below in the form of a powerpoint slide for presentation:
V Trusts and private international law
The law relating to the private international aspects of trusts is underdeveloped to say the least and ‘anything like an attempt at systematic exposition would be premature’. All that can be done is to set out some of the principles which ought to be applicable to such cases. As elsewhere in the law of property, the distinction between movables and immovables dominates the law. Three further aspects should be kept clearly distinct, however.
In the first place, a contract to create a trust, ie wherein the founder undertakes to transfer the trust property to the trustees at some point in the future, will be governed by its own proper law which may not be the law which governs the trust itself. Likewise, a different law may govern the validity of a will from that which governs the trust thereby created. The ordinary rules governing choice of law in contract and the validity of wills will determine when this divergence takes place.
Secondly, the juristic act which creates the trust—the act of executing the trust deed or otherwise transferring the trust property to the trustees—may be governed by a law different from that which governs the interpretation, administration and other aspects of the trust.
In the third place, as adumbrated, a different law may govern the administration of the trust from that which governs its creation.
With these distinctions clearly in mind, the law can be considered.
(i) Trusts of immovable property
Here the law is relatively clear: trusts of immovables will be governed by the lex situs of the immovables. This rule is simply the result of the general dominance of the lex situs in matters touching immovables, and it admits of one possible exception: where a
trust is created in immovables in an antenuptial contract, the law of the husband’s domicile will govern that trust since that law governs the entire matrimonial property regime. This rule, ordaining the predominance of the lex situs, it appears, is widely cast and includes not only the validity of the trust but also its construction and administration. The width of the rule, however, has not escaped criticism. After all, where the trust property consists of movables and immovables or immovables situated in a number of different countries, surely it would be more convenient that all the property be administered under the same law? It may be, therefore, in appropriate cases that our courts will develop further exceptions to this rule. Especially where the trust property is situated in several places, there is scope for the development of a ‘proper law of the trust’— probably that of the locus of administration—which will govern the administration of the trust. The validity of the trust, however, will always have to be governed by the lex situs.
(ii) Trusts of movable property
Trusts of movables may come about as a result of transfer to a trustee pursuant to the will of the founder or pursuant to some other juristic act inter vivos.
(a) The validity of testamentary trusts of movables
It is clear that the ordinary rules regarding the validity of wills apply regarding the validity of a will setting up a trust of movables, and it would be surprising were this not so. A will may, however, set up a trust whose validity is not to be determined by the same law which determines the will’s validity. Our authorities are silent on this possibility, but there seems to be little reason why the testator could not, expressly or impliedly, choose a law to govern the trust he founds. In the absence of such choice, however, how is the governing legal system to be selected? The lex situs of the movables, it is here submitted, has a relatively weak claim for consideration; the situs of movables is variable and given that the trust may last a long time seems a rather arbitrary connecting factor. The alternative connecting factors appear to be either the domiciliary law of the testator—which would accord with the normal rules governing choice of law in succession—or the law of the locus of administration of the trust. English law appears to favour the locus of administration, and Honoré apparently favours a policy-influenced choice between the two.
(b) The validity of trusts of movables inter vivos
Here too, the question is whether the validity of the inter vivos trust is to be determined by the founder’s domicile or the locus of administration. It seems agreed that the lex situs has only a small role to play. The founder, or settlor, can also choose the law applicable.
Our cases are, however, silent on which connecting factor is to be used in the event of the founder not having made a choice.
(c) The administration and construction of trusts of movables
Where a testamentary trust has been set up it may be that a question touching the construction of the will is raised; in such cases the domiciliary law of the testator—the standard law for construction of a will—will be used. Thus in Ex parte Courtenay Selous School Parent Teachers Association it was held ‘that the proper law to be applied is that prevailing … where a testator was domiciled.’ And the same point was made in Wynn NO and Westminster Bank Ltd NO v Oppenheimer and Others. It was held that while a question of administration would in the circumstances be governed by English law, since a question of the construction of the will arose, the law to be applied was that of the testator’s domicile. Similarly in trusts inter vivos, a point concerning the construction of the trust deed will be governed by the proper law of that deed, which may differ from that governing the administration of the trust. Where the administration of a trust of movables is concerned, the locus of administration is predominant. In Kalshoven v Kalshoven and Another NO for example, it was said that ‘[t]he duty of a trustee is to administer the trust in accordance with its terms and the general law of trusts of the country where the trust is being administered.’ Difficulties may arise, however, where the situs of the trust property and its locus of administration differ. Generally, however, the locus of administration ought to prevail; after all, a single trust may administer movables in a number of different countries, and it would be inconvenient indeed if all the trust property could not be administered according to the same law. Where provision is made in the trust deed for changing the locus of administration, this will generally mean that the law governing the administration of the trust will change also; at any rate, in Fattorini v Johannesburg Board of Executors & Trust Co Ltd it was held that the founder of a trust which provided for a change of locus ‘intended that his new trustees governing the assets in the new country should do so in accordance with the law of that country’.
Title: Trusts and private international law
- Private international law in relation to trusts is underdeveloped
- Distinctions to keep in mind:
1. Different laws may govern the creation of a trust, the validity of a will, and the administration of the trust
2. Trusts of immovable property are governed by the lex situs
3. Trusts of movable property may have connecting factors such as the founder's domicile or the locus of administration
4. The proper law for administration and construction of trusts may differ from the law governing the creation of the trust
- Examples:
1. Testamentary trusts of immovables are usually governed by the lex situs
2. Testamentary trusts of movables may be governed by the founder's domicile or the locus of administration
3. Trusts inter vivos can be governed by the founder's chosen law
4. Construction of wills and trust deeds are governed by the proper law of the document
5. Administration of trusts is usually governed by the locus of administration, even if the trust property is in different countries
- Potential for further development of exceptions to the rule of the lex situs governing trusts, especially in cases where trust property is in multiple locations.