Watt: Equity and Trusts Directions 
Pointers to answering self-assessment questions and exercises
Test bankWatt: Equity and Trusts Directions
Chapter 14
The Law Commission published a Consultation Paper in July 2004 (Capital and Income in Trusts: Classification and Apportionment Law Commission Consultation Paper 175) in which it proposes a new approach to the classification as income or capital of trust receipts and trust expenses in private trusts and a new statutory 'power of allocation' of trust receipts and expenses to income or capital [Part V].
The paper observes that the current 'prescriptive rules' by which investment returns are defined as income or capital 'sometimes give rise to arbitrary and illogical results'. In relation to receipts the paper proposes that 'cash distributions from corporate entities (or distributions in respect of which the trustee has the option of taking cash) [typically dividend payments] should be treated as income and distributions in any other form should be classified as capital'. In relation to expenses it is proposed that '[t]he classification of trust expenses should depend on the purpose for which they were incurred'.
The paper approves the rule laid down by Lord Templeman in Carver v Duncan [[1985] AC 1082 at 1120] that income should bear 'all ordinary outgoings of a recurrent nature' whereas expenses incurred 'for the benefit of the whole estate' should be attributed to capital, but The Law Commission is not convinced that it would be desirable to enact the rule in statutory form.
Work on this project has been suspended pending completion of the Commission's cohabitation project (published in July 2007) and will recommence in January 2008.
www.lawcom.gov.uk/docs/cp175sum.pdf
Law Commission Consultation Paper 175, Capital and Income in Trusts: Classification and Apportionment, July 2004 (consultation responses required by 31 October 2004)
www.lawcom.gov.uk/docs/cp175.pdf (full paper)
www.lawcom.gov.uk/docs/cp175sum.pdf (summary)
This consultation paper provisionally proposes, inter alia, that there ought to be imposed on trustees a new statutory duty to balance the interests of income and capital beneficiaries, which will be presumed to apply even in relation to original investments.
L. M. Clements, B.A, LL.M, Lecturer in Law, University of Hull
'Bringing Trusts into the Twenty-First Century'
webjcli.ncl.ac.uk/2004/issue2/clements2.html
According to the author "This article looks at the impact of the Trustee Act, 2000 on the law of trusts in the twenty-first century and addresses the issue of whether the law of trusts has been brought sufficiently up-to-date to enable it to cope with the challenges it now faces. The article discusses the reasons behind the introduction of the Trustee Act, 2000 and critically examines the changes that have been made to the law of trusts as a result of its introduction. The Article also assesses the impact of the legislation in the light of post - 2000 Act economic experience and focuses in particular on the effect of the legislation in the specific contexts of Investment, Remuneration of Trustees and the Exclusion of Liability of Professional Trustees."
Charity Commission leaflet CC14 - Investment of Charitable Funds
www.charity-commission.gov.uk/publications/cc14.asp
D Morris 'Charity Investment in the UK: Some Contemporary Issues for the 1990s'
webjcli.ncl.ac.uk/articles3/morris3.html
Alberta Law Reform Institute, 'Investment by Nonprofit Entities: A Feasibility Study' April 2002.
www.law.ualberta.ca/alri/docs/FS_Notforprofitinvestments.pdf
The website of the World Gold Council
www.gold.org/sitemap/
R Twigger Inflation: The Value of the Pound 1750-1998 Research paper 99/20 23 February 1999 (Economic Policy and Statistics Section House of Commons Library).
www.parliament.uk/commons/lib/research/rp99/rp99-020.pdf
View print version