Under some trusts the beneficiary has rights in rem against the trust property (p. 173)
7.01 The debate on the nature of a beneficiary's interest under a trust, and specifically whether a beneficiary's rights are rights in personam against the trustee or rights in rem against the trust property, has a long history and remains controversial. It is certainly the case that a beneficiary has a right in personam to insist upon and compel the due and proper administration of the trust by the trustee and to require the trustee to account for his stewardship of trust assets. However, it also seems clear that, at least in relation to certain kinds of trust, such as a bare trust, a beneficiary has rights in rem, in that he can compel the trustee to transfer the legal title to him. Moreover, as a general rule, a beneficial interest under a ‘fixed’ trust, ie a defined, limited interest (be it vested or contingent, in possession or in remainder), clearly possesses many of the characteristics of ‘property’. [fn. 2: Tinsley v. Milligan, [1994] AC 340, 371] The beneficiary can alienate such an interest by assignment of otherwise; and he can declare (sub-)trusts of that interest. In addition, a beneficiary—including an object of a discretionary trust who has no right to compel the trustee to pay him any trust income or capital, who is dependent on the exercise of the trustees' discretion in his favour, and who cannot, therefore, be said to have an equitable proprietary interest as such—may still trace the trust assets into the hands -of third parties (unless that third party is ‘equity's darling’ or otherwise protected).
Title of equitable owner (beneficiary) not quite as absolute as that of legal owner (p. 174)
7.02 ... [T]he position in equity was that a person who took the trust property without giving value in exchange (a donee, heir, or executor) took it with all its attaching burdens, equitable and legal; and that even someone who had given value would be bound if, before the conveyance, he knew of (ie had notice of) the existence of the trust. The ‘polar star of equity’ thus became: legal rights are good against all the world; equitable rights are good against all persons except , a bona fide purchaser of the legal estate for value without notice (ie ‘equity's darling’) and those claiming under such a purchaser. The title of the equitable owner became almost, but not quite, as absolute and indefeasible as the title of a legal owner. The beneficiary's rights clearly became much more than rights in personam enforceable only against the trustee: they are rights enforceable against virtually all third parties, so at worst they are hybrid rights.
Equitable interest in real estate trust had the quality of real estate (p. 177)
7.08 Equitable interests were modelled ‘into the shape and quality of real estate’ [fn: 27: Burgess v Wheate (1759) 1 Eden 177, 249.] A beneficiary under a fixed trust has an equitable, proprietary interest and, as such, it possesses the usual characteristics of property. Thus, the beneficiary may use or enjoy it or its fruits, charge it or assign it to another. The nature and extent of the beneficiary s rights will depend on the nature and extent of the interest itself, for example whether it is limited or absolute, determinable or conditional, and so forth. Subject to this, however, a restraint on the alienation of an equitable interest is generally as ineffective as one imposed on a legal interest.
Under some trusts the beneficiary has rights in rem against the trust property (p. 173)
7.01 The debate on the nature of a beneficiary's interest under a trust, and specifically whether a beneficiary's rights are rights in personam against the trustee or rights in rem against the trust property, has a long history and remains controversial. It is certainly the case that a beneficiary has a right in personam to insist upon and compel the due and proper administration of the trust by the trustee and to require the trustee to account for his stewardship of trust assets. However, it also seems clear that, at least in relation to certain kinds of trust, such as a bare trust, a beneficiary has rights in rem, in that he can compel the trustee to transfer the legal title to him. Moreover, as a general rule, a beneficial interest under a ‘fixed’ trust, ie a defined, limited interest (be it vested or contingent, in possession or in remainder), clearly possesses many of the characteristics of ‘property’. [fn. 2: Tinsley v. Milligan, [1994] AC 340, 371] The beneficiary can alienate such an interest by assignment of otherwise; and he can declare (sub-)trusts of that interest. In addition, a beneficiary—including an object of a discretionary trust who has no right to compel the trustee to pay him any trust income or capital, who is dependent on the exercise of the trustees' discretion in his favour, and who cannot, therefore, be said to have an equitable proprietary interest as such—may still trace the trust assets into the hands of third parties (unless that third party is ‘equity's darling’ or otherwise protected).
Proprietary nature of an interest in a Saunders v Vautier trust
7.05 The proprietary nature of a beneficiary’s interest is illustrated most clearly in the case of a bare trust or, indeed, any trust, to which the rule in Saunders v Vautier applies. Under this rule, an adult beneficiary (or a number of adult beneficiaries acting together) who is (or are) of full legal capacity and has (or between them have) an absolute, vested, and indefeasible interest in the capital and income of trust property may terminate the trust and require the trustee to transfer the property to him (or them). The underlying principle is that a man may deal with his own property as he wishes and the court will not enforce any restraint on his absolute ownership and enjoyment. Thus, if property is given absolutely to an infant beneficiary, with a direction that the income of that property is to be accumulated until some age beyond his age of majority, he may put a stop to the accumulation and demand payment to him of both capital and income as soon as he attains the age of 18 years. Provided the conditions are met, not only may several beneficial co-owners invoke the rule but so, too, may beneficiaries entitled in succession.
Different where beneficiary does not have absolute interest (p. 176)
7.06 Clearly, the rule cannot apply where the beneficiary does not have an absolute interest, for example because he has a contingent, limited, or future interest; or where his interest is vested but defeasible, for instance by the exercise of an over-riding power of appointment; or where unborn or infant beneficiaries have an actual or potential interest; or where the class of beneficiaries is not closed; or where there is no unanimity. Nor does the rule entitle the beneficiaries to direct the trustees to appoint their own nominee as a new trustee of a continuing trust, or to give directions as to the investments that trustees should make, or to demand that the trustees do anything which they are not willing to do beyond handing over the trust property to the beneficiaries or their nominees (against a proper discharge.) Also, the rights of the beneficiaries are subject to the rights of the trustees to be fully protected against such matters as taxes, costs or other outgoings (for example rent under a lease comprised in the trust fund).
Similarly where pro rata entitlement to dividable trust property (pp. 176-177)
7.07 A single beneficiary who satisfies the condition of the rule but is absolutely entitled only to an undivided share of the trust fund has rights which are similar to, but not quite as extensive as, those of the beneficiaries collectively. In general, he is entitled to have transferred to him (subject to the above-mentioned rights of the trustees) an aliquot share of each and every asset of the trust fund which presents no difficulty as far as division is concerned. This will apply to cash, an unsecured loan, stock exchange securities, and the like, where the property is easily divisible; but not to land or, in some cases, to shares in private companies or mortgage debts, where it is not. In the latter cases, the beneficiary will have to wait until the property is sold before being able to call on the trustees as of right to account to him for his share of the assets.
Equitable interest in real estate trust has the quality of real estate (p. 177)
7.08 Equitable interests were modelled ‘into the shape and quality of real estate’ [fn: 27: Burgess v Wheate (1759) 1 Eden 177, 249.] A beneficiary under a fixed trust has an equitable, proprietary interest and, as such, it possesses the usual characteristics of property. Thus, the beneficiary may use or enjoy it or its fruits, charge it or assign it to another. The nature and extent of the beneficiary's rights will depend on the nature and extent of the interest itself, for example whether it is limited or absolute, determinable or conditional, and so forth. Subject to this, however, a restraint on the alienation of an equitable interest is generally as ineffective as one imposed on a legal interest.
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