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Transcript

My name’s Richard Nolan, I’m here to talk about another, I think the last of the group of commercial papers, commercial equity.

Equity is not often associated in people’s minds with commerce. It has, particularly the law of trusts, a great aspect of the law of equity, a rather Jane Austen image, which, if you’re into Colin Firth, may be a good thing – but I’m not. We teach a course, which perhaps ought to have the title that was used by the very eminent American scholar, John Langbein, in Yale, for one of his famous articles, “The Secret Life of the Trust” – it’s one of his famous articles. That really is quite a good description of a large part of this course.

Most trusts, and the value in them, are actually to do with commerce. The family settlement, though it may be the historical origin of the law of trusts, is actually, in terms of practical importance, today something of an outlier compared to the use of trusts in commerce. What we do in this course is essentially take a functional look at trust doctrine as used in commerce – and I’ll give you some examples of that in a moment – and that’s probably the bulk of the course, probably about two-thirds of it. We also do look at other equitable doctrine that is of particular relevance to the commercial environment, particularly fiduciary duties in a commercial environment.

Examples then. What do we do actually with law of trusts first off? Well, to call it The Secret Life of the Law of Trusts, I’m afraid does make it sound a little bit spicier than it actually is. It’s never going to be on the top shelf of W H Smith’s, I’m afraid. But we do look at the way trusts work, the way they are managed from a functional perspective and the way they’ve been pressed into use, really, I suppose, over the last century or so, in commerce. For example, I’m going to be giving quite a series of lectures on how to blow up the world economy, also known as the use of trusts in debt finance, which did have a lot to do with blowing up the world economy, as it happened.

The trusts you look at in those circumstances are fundamentally modelled out of the same body of trust law as your classic family settlement, but boy has it been re-defined and re-modelled by express stipulations to look rather different. We’re looking at trust law, in other words, at the commercial limits. That raises certain particular pressure points, certain particular topics that we look at in more depth. For example, is there such a thing as a core law of trusts beyond which these clever drafters in London, in New York, in Sydney, wherever, just can’t go? What about rights to information and enforcement and the agency problems inherent in a trust management structure or a business or an issue of debt? What about the relationship between beneficiaries in those circumstances? Not something often thought of in the classic law of trusts, but very much, when they’re active investors, something that’s relevant here. What about rights to information about how a trust is run? Classically, in the family settlement the trustees just did things and said to the relevant family beneficiaries, “Shut up and be grateful.” Not really appropriate in a commercial context. What does happen instead? What about challenges to the law of trusts as it’s commonly understood in the big onshore jurisdictions, challenges posed largely by the island offshore jurisdictions? I’m thinking of things like purpose trusts and suchlike, that were used – how can I put this delicately? To put the beneficial ownership of assets into a black hole. The trouble was that black hole sucked the rest of us in after it, but never mind.

Those are the sort of issues which arise and which we consider when trusts are used in commerce, also trust management, not just sitting on a particular asset, what do you do when you’re expected to manage a dynamic fluid fund of assets and what are the problems that arise from that? What about pension trusts? Particularly interesting to me as a beneficiary of the University’s superannuation scheme – I listened very carefully, not necessarily happily but carefully. As I say, about a third, roughly, of the course, we do look at equitable doctrine, particularly fiduciaries, which Matt Conaglen, who also lectures on this course and has written very extensively an eminently on the subject, will talk to you about.

The team that lectures is yours truly; as I said, Matthew Conaglen, who’s particularly interested in fiduciaries, written essentially what is now the major work on it, fiduciary loyalty – I’d say probably the most important thing written since Paul Finn wrote his Fiduciary Obligations back in 1977, before you were born. Not before I was born. David Fox has an interest in pension funds and that side of things – he will lecture you on that and others. So, there are three of us that run the course.

A little bit of background. Obviously, this course does assume a good working knowledge of the law of trusts. We are not re-running an undergraduate trust law course, going through the stuff you’ve learned there. Now, that does, obviously, raise an immediate problem for those of you from a civilian background who haven’t got an undergraduate background in the law of trusts, which you can pretty much assume from anyone from a common law jurisdiction. Is this subject, therefore, off limits to those from a civilian background? Answer, no. We have had some very successful students doing this course over the years from civilian backgrounds. Just to give you two examples, earlier in the year I had a very nice email from a former student who we’ve all stayed in touch with, who’s Swiss, who very kindly emailed to say just how useful he was finding the course now back in Geneva in a fiduciary asset management firm. He did actually say, “At the time I wondered what you were blabbering on about and was it really all that difficult?” but he did have the kindness to say that actually it had turned out to be very useful.

Another example, Gabriella Laufa, who was a student a couple of years ago from Brazil, who did a thesis, got 136, which in Cambridge terms is a very high 2:1, but again from a standing start in terms of her knowledge of trust law, and she wrote on a comparison of trustees and fiduciary agents in bond issues. From a standing start on the law of trust to 136 by June – not bad, to put it mildly.

However, it’s got to be said, to be fair, if you are from a civilian background, it will mean more work because you’re got some catching up to do. We can advise you, and will advise you, on what reading to do by way of catch-up. So I think the fair way to sum it up is: no, it’s not off limits to those of you who don’t have a background in trust law; yes, it will be more work for those of you who don’t have a background in trust law, but if you want to do it, it very clearly can be done well because it has been done well, we have the proof of the pudding. If any of you, particularly from a civilian background, want to talk about that more, if we’ve got time for questions, do it then or otherwise Monday 4 o’clock to the first lecture, we can talk about it then. I realise it is an issue because that is one area where your background and your legal education will vary enormously depending on whether you come from a common law or a civilian background.

A quick bit about assessment. We do offer the thesis option, as you will have gathered from what I said about Gabriella. The other is just the one option of a three-hour examination, what I call semi-closed book. What I mean by that is you are provided with all the materials: statutory, lecture handouts, etc, etc, etc in a bound volume for you to use in the exam, but you don’t take your own notes in. Why do we do it that way? It’s a bit aide-memoire because we’re not looking at a memory test, and we did find that if people take all their notes and things they prepared into exams, it’s actually unhelpful. They waste an enormous amount of time in a three-hour exam rifling through that and, therefore, don’t actually have the time to write a particularly good exam paper. What we really give you is a written comfort blanket. You’re not having to think, “Oh, my God, if I forget X that’s it, I’m doomed,” but equally you do want to know your stuff thoroughly because it’s just a waste of time to try and look it up in what is three hours only.

Keeping an eye on the time, I will finish there unless any of you have any questions, which I will quite happily answer, but 4 o’clock on Monday is when we kick off. Anyone got any questions?

Added on 05/10/2011.

Last modified on 11/10/2011

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