Thanks to Michael Bridge, Mindy Chen-Wishart, Tatiana Cutts, Simon Douglas, Andrew Dyson, Jamie Edelman, Jamie Glister, Andrew Halpin, Matthew Harding, Hock Lai Ho, David Hayton, Ming Wai Lau, Tim Liau, Miguel Lopez-Lorenzo, John Mee, Charles Mitchell, Aruna Nair, Donal Nolan, Pauline Ridge, Nicole Roughan, Irit Samet, Andrew Simester, Yock Lin Tan, Peter Turner and Fred Wilmot-Smith. I owe especial thanks to Rob Chambers, Josh Getzler, Dennis Klimchuk, Ben McFarlane, Lionel Smith, Rob Stevens and Bill Swadling for extensive discussion of these issues over the years which helped me to correct a multiplicity of errors and misconceptions on my part. None bear any blame for the final result.

1. Chambers, Robert, An Introduction to Property Law in Australia (Sydney: Thomson Law Book, 2001) at 115 Google Scholar; see now the 3rd edition (2013) at para [13.90].

2. Smith, Lionel D, “Trust and Patrimony” (2008) 38 RGD 379.Google Scholar

3. McFarlane, Ben & Stevens, Robert, “The Nature of Equitable Property” (2010) 4 Journal of Equity 1.Google Scholar

4. Parkinson, Patrick, “Reconceptualising the Express Trust” (2002) 61 Cambridge LJ 657 at 659CrossRefGoogle Scholar, argues that “the law of trusts is better conceptualised as a species of obligation rather than being understood as a form of property ownership” but for different reasons than those offered by Smith, McFarlane and Stevens. Parkinson argues principally for the reasons (1) that there are now established examples of trusts, in particular the McPhail v. Doulton ([1971] AC 424) discretionary trust, where there is no immediate vested beneficial interest in the trust property, and (2) that much of the law on certainty of subject matter is better conceived as concerning certainty of intention to create a trust. The former of these reasons will be addressed below in Part 8.

5. McFarlane & Stevens, supra note 3 at 2.

6. As is the restrictive covenant. It is beyond the scope of this paper to address whether and why it has no clear common law counterparts, though the life tenant’s common law duty not to commit waste, whilst not arising from an agreement (though impeachment for waste could be excluded in the grant) has a similar form.

7. Smith, supra note 2 at 382 et seq.

8. Penner, JE, The Idea of Property in Law (Oxford: Clarendon Press, 1997) at 25–31 Google Scholar [Penner, Idea of Property]; see also Penner, James, “On the Very Idea of Transmissible Rights” in Penner, James & Smith, Henry E, eds, Philosophical Foundations of Property Law (Oxford: Oxford University Press, 2013) 244.CrossRefGoogle Scholar

9. Which is not, of course, to say that a third party cannot induce one party not to perform their obligations, or impede their performance in some way: OBG v. Allan [2007] UKHL 21, [2008] 1 AC 1.

10. Chambers’s word; Chambers, supra note 1.

11. Matthews, Paul, “From Obligation to Property, and Back Again? The Future of the Non-Charitable Purpose Trust” in Hayton, David, ed, Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (London: Kluwer Law International, 2002) at 206.Google Scholar

12. Maitland, FW, Equity, Also the Forms of Action at Common Law (Cambridge: Cambridge University Press, 1929) at 19.Google Scholar

13. Tatiana Cutts, Cf, “The Nature of ‘equitable property’: A functional analysis” (2012) 6 Journal of Equity 44 at 57 et seqGoogle Scholar, who argues that a beneficiary’s interest under a trust consists of a power to require the trustee to exercise his powers of title to transfer the trust asset to the beneficiary; by contrast, the proposal here is that the beneficiary’s interest is a right, correlative with the trustee’s duty to exercise his powers of title to carry out the administrative and dispositive provisions of the trust.

14. Maitland, supra note 12. For a recent review of the Maitland–Scott/Austin debate on whether the beneficiary’s right is in rem or in personam, see Wai Lau, Ming, “The Nature of the Beneficial Interest: Historical and Economic Perspectives Google Scholar”, available on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2213055.

15. McFarlane & Stevens, supra note 3 at 1-2.

16. If the reader finds this compelling, the closest civilian analogy to the trust is the Roman/Dutch law bewind, which Gretton ( Gretton, G,‘Trusts without Equity’ (2000) 49 ICLQ 599 CrossRefGoogle Scholar) describes in the following passage on page 603 [footnotes omitted]:

The last sentence is telling; it assumes that ‘title’ in Dutch law has the same meaning as ‘title’ in a Common Law system. But under a fused system of Common Law and Equity, there is only one ‘beneficial’ interest, and that is with the beneficiary, i.e., it is located just where it is under the bewind; as Gretton says, it is the ‘“beneficiary” who is the owner.’

17. There are, of course, differences between a power of attorney and a trust; for example, a transfer in breach of a power of attorney may not validly pass legal title, whereas a trustee’s transfer in breach of trust does. The point is that, despite disparate rules, there is a clear functional analogy.

18. McFarlane & Stevens, supra note 3 at 2, n 2.

19. It seems to me that framing the third party’s obligation in this way is very much like the way the tort of inducing or ‘interfering with’ contractual obligations is framed. If so, then this way of widening the ambit of a personal obligation is not peculiar to equity at all, which contrasts with what Smith suggests in the next quoted passage. See further text to infra note 58.

20. Smith, supra note 2 at 390-92 [emphasis added] [footnotes omitted].

21. Ibid at 393 [emphasis added].

22. Ibid at 392 [footnotes omitted].

23. McFarlane & Stevens, supra note 3 at 3-4.

24. McFarlane, Ben, The Structure of Property Law (Oxford: Hart, 2008) at 22–26.Google Scholar

25. Penner, James, “Review of Ben McFarlane, The Structure of Property Law”, Book Review, [2009] 17 RLR 250 at 254-55.Google Scholar

26. McFarlane & Stevens, supra note 3 at 4.

27. The only true exception to this is the case of the trustee who personally acts in a trade in the case of a business conducted under a trust. In such a case, the trustee, to the extent he is himself employed in conducting the business or supervising the employees of the business, will take advantage of his right to the immediate, exclusive possession of the tangible trust property. In such cases, which are, and for the sake of the trustee ought to be, exceedingly rare, the right of the beneficiary to require the trustee to exercise his powers to license for the benefit of the trust (to employees making effective business uses of the assets, not to his relations, for instance) will come into its own.

28. See, e.g., Burn, EH & Cartwright, , Cheshire and Burn’s Modern Law of Real Property, 18th ed (Oxford: Oxford University Press, 2011) ch 14.Google Scholar

29. See DKLR Holdings Co (No 2) v. Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510, 10 ATR 942 per Hope JA at 949.

30. With respect to land, see Manchester Airport v. Dutton [2000] 1 QB 133 per Chadwick LJ at 136-47. Although Chadwick LJ was in dissent, it was because, unlike the majority, he was not willing to extend a possessory claim to a gratuitous licensee that was not in possession. One further question is whether a beneficiary who has a present right against a trustee under the trust terms to be put in possession of trust land, but isn’t actually in factual possession yet, should be treated as a mere licensee, or something more. I should say more: there is no question that the beneficiary could obtain the court’s assistance to require the trustee to put him in possession, whereas a mere licensee is not conventionally considered to have the same right of specific performance of the license. With respect to chattels, see The Winkfield [1902] P 42; Bridge, Michael, Personal Property Law, 3d ed (Oxford: Oxford University Press, 2002) at 62–64.Google Scholar

31. Qua trustee, that is; he may be entitled as a beneficiary.

32. Though the trustee’s power of sale remains after an adverse possession of land or the conversion of a chattel, without possession the trustee will be unable to sell the asset because no one will buy it due to his inability to deliver up possession. Or, in the alternative, he will be forced to sell at a severe discount in view of the fact that the purchaser will have to pursue a remedy against the wrongdoer in order to realise the value of what she has just purchased.

33. A similar analysis applies to the case where a trustee runs a business in his own name for the beneficiaries. In such cases, and unlike that of company shareholders, the beneficiaries have no rights of control over how the trustee runs the business, that is, over how he makes use of his possessory rights in the tangible trust assets to generate a profit; rather, they are interested only in the fruits of his exercise of these powers, most obviously trading profits.

34. See also s 15 (2) of the Limitations Act, 1970, which extends the limitation period to allow those with future interest, including future interests under trusts, to bring a claim following the successful extinction of the trustee’s own right to possession; it is not the trustee’s right to possession that matters (or that of a predecessor beneficiary in possession), but the interest of the beneficiary with a future interest in the legal title-holder’s exercising his powers for the benefit of the beneficiary which governs the logic. On McFarlane’s and Stevens’s proposal it would seem to follow that, where the trustee loses his right to possession through the adverse possession of another, the beneficiary with a future interest would have only a claim for breach of trust against the trustee.

35. A beneficiary can realise the value of her equitable interest by assigning it for value, but that is not, strictly speaking, benefiting under the terms of the trust, but rather transferring the right to benefit under those terms to a third party.

36. This is why McFarlane, , Stevens and I could agree that Shell UK v. Total UK [2010] EWCA Civ 180, 3 WLR 1192 Google Scholar is wrongly decided. There is no reason why a beneficiary without possession of the trust assets (the land in question was in the possession of an operating company acting as agent for the trustees) should have a claim for consequential economic loss against a third party in virtue of his damaging those assets.

37. Baker, JH, An Introduction to English Legal History, 4th ed (Oxford: Oxford University Press, 2002) at 251.Google Scholar

38. McFarlane & Stevens, supra note 3 at 2 [footnotes omitted].

39. Ibid at 18-19 [footnotes omitted].

40. Ibid at 3-4.

41. See Penner, Idea of Property, supra note 8 at ch 4, 5.

42. To say this is not to say that, in the case of tangibles, the right to exclusive, immediate possession is not an essential, and theoretically very important, aspect of the right; see ibid, ch 4. For a recent meditation on this issue see Ripstein, Arthur, “Possession and Use” in Penner, James & Smith, Henry E, eds, Philosophical Foundations of Property Law (Oxford: Oxford University Press, 2013) at 156.CrossRefGoogle Scholar The point is that we are confused if we try to model all perfectly respectable property rights as possessory rights, or worse, try to deny any non-possessory interest the status of legal property.

43. Indeed Smith describes the trust as an ‘encumbrance’ or ‘super-encumbrance’; Smith, Lionel, “Scottish Trusts in the Common Law” (2013) 17 Edinburgh L Rev 283 at 288.CrossRefGoogle Scholar

44. It might be supposed that the famous case of Burgess v. Wheate (1759) 1 WmBl 123, 1 Eden 177, stands for the proposition that the trustee is a residual claimant to the trust property. As Matthews’s detailed analysis of the case ( Matthews, Paul, “Burgess v. Wheate” in Mitchell, Charles & Mitchell, Paul, eds, Landmark Cases in Equity (Oxford: Hart, 2012) at 115 Google Scholar) shows, however, it does nothing of the kind. What the case stands for (as regards the main point in issue) is that the feudal, Common Law doctrine of escheat does not extend to equitable interests. As Matthews makes clear, there was no finding in the case that the defendant trustee in possession of the land was beneficially entitled to it, but merely that the plaintiff’s and the Crown’s claims were no good.

45. See, e.g., Re Stratton’s Disclaimer; Stratton v. IRC [1958] Ch 42.

46. So for example, say the trust was of land, for B for life and then for A. On the encumbrance view, it is not clear that A should have the benefit of s 15(2) of the Limitations Act 1980, for an encumbered interest is not a future interest.

47. See Penner, JE, The Law of Trusts, 9th ed (Oxford: Oxford University Press, 2014)CrossRefGoogle Scholar [forthcoming in July 2014] at 106-09 [Penner, Law of Trusts]. For recent discussion of the vendor-purchaser constructive trust, see Chambers, Robert, “The Importance of Specific Performance” in Degeling, Simone & Edelman, Jamie, eds, Equity in Commercial Law (Sydney: Law Book, 2005) 431 Google Scholar; Swadling, William, “The vendor–purchaser constructive trust” in Degeling, & Edelman, Google Scholar, ibid, 463. Turner, PG, “Understanding the Constructive Trust Between Vendor and Purchaser” (2012) 128 Law Q Rev 582.Google Scholar

48. [1982] 1 WLR 201, [1981] 3 All ER 786.

49. McFarlane & Stevens, supra note 3 at 15.

50. The numerus clausus, on the view proposed here, is essentially a matter of the powers an owner of property has, to create the various kinds of interests recognised to fall within it. Nolan, RC, “Equitable Property” (2006) 122 Law Q Rev 232 at 261-62Google Scholar, perceptively shows that the power to declare trusts does not amount to imposing ‘fancies’, i.e., any kind of interest imaginable, on the world in general, for third party recipients of trust property are not required to carry out the trust; rather, they have an obligation only not to act inconsistently with the beneficiaries’ interest. See text accompanying infra note 58.

51. McFarlane & Stevens, supra note 3 at 1-2.

52. He may have a power to re-settle the property, of course, or a discretion to confer absolute interest on objects within a larger class, but these powers derive from the terms of the trust, not from the trustee’s status qua trustee. Such powers could be given to third parties whose directions the trustee would be required to follow.

53. The historical transition may be difficult or impossible to discern, but the conceptual transition is not: acting so as to exercise a power, rather than merely acting so as to generate legal con-sequences (altering the rights, duties, and powers of oneself and/or others), occurs when the law regards such an act as facilitative, in the sense that the law approves of this way of altering legal relations because, in general, it approves of the results, i.e., as a way by which a person can organise her relations with others. See Raz, Joseph, Practical Reasons and Norms (Oxford: Oxford University Press, 1990) at 98–104.Google Scholar

54. The very same sort of story has to be told about the rise of the common law power to enter into informal contracts, i.e., those not under seal. The modern law of contract originated in the tort action of assumpsit, i.e., in a claim for damages for loss in which one pre-condition was that the defendant undertook to do something for the plaintiff. This was a factual pre-condition for the defendant’s liability, but was not considered an exercise of a common law legal power to create a legally binding obligation. But no one would now deny that A and B have a common law legal power to create informal binding contractual obligations.

55. [1971] AC 424.

56. Swadling, William, “Explaining Resulting Trusts” (2008) 124 Law Q Rev 72 at 90 et seqGoogle Scholar, and personal correspondence with the author; one of Swadling’s claims is that in English law there are only legal interests or equitable interests, not a third sort of interest called ‘beneficial’. I believe I have effectively countered that objection in the text to note 52 above (the idea that only someone with a beneficial interest in property, whether legal or equitable, has the power to declare a trust over it).

57. The case of the executor is more complicated. As Matthews, Paul, “Square peg, round hole? Patrimony and the Common Law trust Google Scholar”, on file with the author, points out, at manuscript page 11, an executor’s role involves much more than acting as a conduit between the testator and those who take under a will; it is much more akin to that of a liquidator of a company, where distribution to the shareholders/legatees is only of any remaining surplus after all debts have been paid. The executor’s powers to transfer title to the estate assets, enforceable by the debtors and legatees and ultimately the crown via a claim of bona vacantia, will entirely exhaust the estate, so correlatively, the executor has no beneficial interest in the estate (unless also a legatee).

58. Nolan, supra note 50 at 236-53; see also Mitchell, Charles & Watterson, Stephen, “Remedies for Knowing Receipt” in Mitchell, Charles, ed, Constructive and Resulting Trusts (Oxford: Hart, 2010) 115.Google Scholar

59. The same reasoning applies to explain the principle that a trust will not fail for want of a trustee.

60. With regard to the automatic resulting trust, two prominent examples of this reasoning are: Chambers, Robert, Resulting Trusts (Oxford: Clarendon Press, 1997)CrossRefGoogle Scholar and Swadling, William, “Explaining Resulting Trusts Google Scholar”, supra note 56 at 94-102. With regard to tracing: Burrows, Andrew, The Law of Restitution, 3d ed (Oxford: Oxford University Press, 2011) at ch 6Google Scholar; McFarlane & Stevens, supra note 3 at 20-22.

61. Thus the persistent right analysis appears able to explain ‘following’, but not, without the assistance of unjust enrichment reasoning, ‘tracing’.

62. Penner, James, “Value, Property, and Unjust Enrichment: Trusts of Traceable Proceeds” in Chambers, Robert, Mitchell, Charles & Penner, James, eds, Philosophical Foundations of Unjust Enrichment (Oxford: Oxford University Press, 2009) at 306.CrossRefGoogle Scholar

63. This reasoning also goes to explain cases of tracing which did originate in a beneficiary’s right to trust assets, as is the case where a company director misappropriates company assets. Whilst the company director is not an owner of the company assets, he (a) has powers to deal with the assets, and (b) is not entitled to use those powers for his own benefit. Therefore it is a natural step for equity to conclude that the company has the beneficial interest in the assets, not only in the possession of them through its agents, but in the directors’ powers to transfer them, etc., and therefore hold that proceeds acquired with those non-beneficially held powers are similarly held by the misappropriating director (or third party to whom he transfers them) non-beneficially, thus on trust for the company when the title to the assets is now in the director or third party.

64. As with the case of tracing, the question why a personal claim is not sufficient arises, as Swadling points out; Swadling, “Explaining Resulting Trusts”, supra note 56 at 101. But the glaring inadequacy of this account is that the ‘residual claimant’ view seems to show that the trustee’s enrichment by way of the surplus is not unjust. It is only because he undertook not to exercise his powers of title for his own benefit that he would be ‘unjustly enriched’ to the extent that the trust terms fail to exhaust the beneficial interest. If the trustee’s undertaking of the trust was, conceptually speaking, only an obligation to expend the trust property to the extent of the trust terms, i.e., that he was a residual claimant to the trust assets (see also the next footnote), then his receipt of any surplus would not be an unjust enrichment—his taking the surplus outright would reflect, not contradict, the obligation he undertook. See further Penner, Law of Trusts, supra note 47 at 150-51.

65. Of course there are cases (e.g., Re Foord [1922] 2 Ch 519) where a trustee is entitled to a beneficial interest in the trust assets in so far as there is a surplus to the extent the interest of a life tenant does not exhaust the fund, but this is simply in virtue of the settlor’s intention. To undertake a trust obligation in the regular case is clearly not of the form, ‘I undertake to hold these assets just in so far as you have effectively disposed of the entire interest in them, and anything not so disposed of belongs to me’. Any trustee who spelled this out as his ‘trustee undertaking’ to the would-be settlor (think in particular of professional trust companies) would never be accepted as a trustee.

66. See further Penner, Law of Trusts, supra note 47 at 317-20.

67. Re Vandervell’s Trusts [1967] 2 AC 291 and Air Jamaica Ltd v. Charlton [1999] 1 WLR 1399 being the most recent House of Lords’ and Privy Council’s expression of this reasoning, respectively. See also Mee, John, “‘Automatic’ Resulting Trusts: Retention, Restitution, or Reposing Trust?” in Mitchell, Charles, ed, Constructive and Resulting Trusts (Oxford: Hart, 2010) 207 Google Scholar; Penner, James, “Resulting Trusts and Unjust Enrichment: Three Controversies” in Mitchell, Google Scholar, ibid 237.