Equity & Trusts

Table of Contents

Personal Enforcement of Trust

The Irish courts may enforce a trust relating to foreign immovable property where the defendant is within the state. They may decide whether there a valid trust over it exist.

There may be injustice if the Irish equitable rules are enforced. Accordingly, the rules may be relaxed if the relationship between that foreign claimant and defendant arose under foreign law and is not equivalent to a trustee-beneficiary relationship in equity.

Proceeds of Sale

Where a foreign immovable is sold, the rights of the persons entitled to the proceeds do not cease merely because the proceeds have been brought into the jurisdiction. The law of the place continues to apply to the proceeds of sale and debts to be paid out of them in accordance with the priorities recognised by that law.

A trust declared over the proceeds of sale of foreign land is permissible even though it may be forbidden by the local law while the immovable remains unsold. This is so unless the owner is, for some reason, bound by that law.

Until the sale takes place, the immovable is subject to the local law and the right to enjoy it is governed by it. In the same way, where foreign land is settled on a trust for sale, the trust would not operate until after the sale.

Personal Orders

Domestic courts have the power to exercise personal jurisdiction with respect to foreign immovables against a person within the jurisdiction, where there is equity between the parties. This may arise from a contract, fraud, or trust. This is so provided the issue of title is not directly involved. The equity must not depend on the existence of the foreign law where the immovable is situated.

The equity must be personal in nature. It may arise from a fiduciary relationship between the parties. The courts will not exercise jurisdiction to enforce the principles of equity against third parties who have acquired title by local law. They will not impose on a foreign immovable a burden other than that which the local law requires it to bear.

The courts exercise equitable jurisdiction against third parties who are affected by equities under the local law where the land is situated. If an Irish resident takes a foreign immovable property under an obligation to satisfy another person’s equitable claim out of it, the Irish court will enforce the claim by restraining him from applying the proceeds of the foreign land without making proper provision to satisfy the claim.

Limits to Personal Action

The principle that the Irish courts have jurisdiction where there is equity between the parties is subject to exceptions and limitations. The courts will not, by an injunction, prevent a person from enjoying that which the judgment of a foreign court declares him to be entitled to. Where the foreign court having actual jurisdiction has determined prior litigation, interference would be contrary to comity and public policy.

The courts will not entertain an action where the law of the place where the immovable is situated would not allow the defendant to do what the courts would otherwise decree. They will not interfere where it would be useless or impossible to carry the order into effect.

Accordingly, a judicial sale of land outside the jurisdiction cannot be ordered. The court may make a personal order in the course of bankruptcy or litigation, but it is not directly effective.

Equitable remedies at the discretion of the court. The jurisdiction will not be exercised where the question can be more conveniently decided in the foreign courts than in Ireland.

Hague Convention I (N/A Ireland)

The Hague Convention on the recognition of trusts does not apply in Ireland. It has been ratified by 14 countries including the United Kingdom.

A trust is generally governed by the law selected by the person creating it – the settlor. If this is not specified, it is governed by the law with which it is most closely connected.

In ascertaining the law with which a trust is most closely connected reference shall be made in particular to –

the place of administration of the trust designated by the settlor;
the situs of the assets of the trust;
the place of residence or business of the trustee;
the objects of the trust and the places where they are to be fulfilled.

Hague Convention II (N/A Ireland)

The law specified above shall govern the validity of the trust, its construction, its effects, and the administration of the trust.

In particular that law shall govern –

the appointment, resignation and removal of trustees, the capacity to act as a trustee, and the devolution of the office of trustee;
the rights and duties of trustees among themselves;
the right of trustees to delegate in whole or in part the discharge of their duties or the exercise of their powers;
the power of trustees to administer or to dispose of trust assets, to create security interests in the trust assets, or to acquire new assets;
the powers of investment of trustees;
restrictions upon the duration of the trust, and upon the power to accumulate the income of the trust;
the relationships between the trustees and the beneficiaries including the personal liability of the trustees to the beneficiaries;
the variation or termination of the trust;
the distribution of the trust assets;
the duty of trustees to account for their administration.

A trust created in accordance with the law specified above shall be recognised as a trust. Such recognition shall imply, as a minimum, that the trust property constitutes a separate fund, that the trustee may sue and be sued in his capacity as trustee, and that he may appear or act in this capacity before a notary or any person acting in an official capacity.

Hague Convention III (N/A Ireland)

In so far as the law applicable to the trust requires or provides, such recognition shall imply, in particular –

that personal creditors of the trustee shall have no recourse against the trust assets;
that the trust assets shall not form part of the trustee’s estate upon his insolvency or bankruptcy;
that the trust assets shall not form part of the matrimonial property of the trustee or his spouse nor part of the trustee’s estate upon his death;
that the trust assets may be recovered when the trustee, in breach of trust, has mingled trust assets with his own property or has alienated trust assets. However, the rights and obligations of any third party holder of the assets shall remain subject to the law determined by the choice of law rules of the forum.

Where the trustee desires to register assets, movable or immovable, or documents of title to them, he shall be entitled, in so far as this is not prohibited by or inconsistent with the law of the State where registration is sought, to do so in his capacity as trustee or in such other way that the existence of the trust is disclosed.

No State shall be bound to recognise a trust the significant elements of which, except for the choice of the applicable law, the place of administration and the habitual residence of the trustee, are more closely connected with States which do not have the institution of the trust or the category of trust involved.

The Convention shall not prevent the application of rules of law more favourable to the recognition of trusts.

Hague Convention IV (N/A Ireland)

The Convention does not prevent the application of provisions of the law designated by the conflicts rules of the forum, in so far as those provisions cannot be derogated from by voluntary act, relating in particular to the following matters –

a)the protection of minors and incapable parties;
b)the personal and proprietary effects of marriage;
c) succession rights, testate and intestate, especially the indefeasible shares of spouses and relatives;
d) the transfer of title to property and security interests in property;
e) the protection of creditors in matters of insolvency;
f) the protection, in other respects, of third parties acting in good faith.

If recognition of a trust is prevented by application of the preceding paragraph, the court shall try to give effect to the objects of the trust by other means.

The Convention does not prevent the application of those provisions of the law of the forum which must be applied even to international situations, irrespective of rules of conflict of laws.

If another State has a sufficiently close connection with a case then, in exceptional circumstances, effect may also be given to rules of that State which have the same character as mentioned in the preceding paragraph.

Any Contracting State may, by way of reservation, declare that it will not apply the second paragraph of this Article.

Hague Convention V (N/A Ireland)

The provisions of the Convention may be disregarded when their application would be manifestly incompatible with public policy (ordre public).Nothing in the Convention shall prejudice the powers of States in fiscal matters.

Any Contracting State may, at any time, declare that the provisions of the Convention will be extended to trusts declared by judicial decisions.

This declaration shall be notified to the Ministry of Foreign Affairs of the Kingdom of the Netherlands and will come into effect on the day when this notification is received.

Article 31 is applicable to the withdrawal of this declaration in the same way as it applies to a denunciation of the Convention. Any Contracting State may reserve the right to apply the provisions of Chapter III only to trusts the validity of which is governed by the law of a Contracting State.