|Trust Drafting in Northern Ireland|
In many respects, the law of trusts in Northern Ireland is broadly similar to that in England and Wales. The relevant legislation – a combination of Acts of the old Northern Ireland Parliament, Orders in Council made after its suspension and one Act of the new Assembly is, in large part, identical in substance to the English and Welsh provisions.1
Successive legislatures have adopted the English and Welsh approach whenever possible, but Northern Ireland trust law is certainly not a mirror image of that in England and Wales
The general pattern has been that Northern Ireland eventually follows where England and Wales have gone, with a time lag ranging from less than a year (as with the enactment of the Trustee Act (NI) 2001) to 33 years (as with the Trustee Act (NI) 1958, much of which corresponds to the English and Welsh Trustee Act 1925). Although it was encouraging that one of the first statutes of the Northern Ireland Assembly post-devolution was the Trustee Act (NI) 2001, the legislature has shown little appetite for reform since then, causing the Northern Ireland trust practitioner concern as to how the jurisdiction will keep pace with developments elsewhere (and not just those in England and Wales, as the Republic of Ireland also has a very active Law Reform Commission).
While the policy of the successive legislatures has been to adopt the English and Welsh approach whenever possible, so as to minimise potential private international law issues, Northern Ireland trust law is certainly not a mirror image of that in England and Wales. There are a few substantial differences and several other more minor ones, which may nonetheless be significant in practice.
Trust for sale clauses
Save for the provisions for replacing trustees at the direction of sui juris beneficiaries (found in s34 Trustee Act (NI) 2001), Northern Ireland has no equivalent of the Trusts of Land and Appointment of Trustees Act 1996 (the 1996 Act). Indeed, Northern Ireland also missed out on legislation equivalent to the English and Welsh Settled Land Act 1925. In Northern Ireland, therefore, the Settled Land Acts 1882–1890 (SLAs) are still alive and well, conferring very wide powers, including the power of sale, on the tenant for life rather than the trustees.
Consequently, it is imperative that Northern Ireland trust drafters continue to provide that land is held upon trust for sale. The inclusion of a trust for sale clause does not, as it did in England and Wales before the enactment of the 1996 Act, provide an entirely watertight escape from the provisions of the SLAs. It is still open to the tenant for life to apply to the court under s7 SLA 1884 to have the power of sale returned to them. In practice, such applications are never made and most flexible modern trust instruments confer overriding powers on the trustees to terminate a life tenant’s interest should they threaten to invoke the s7 power.
The Accumulations Act 1800 did not extend to Ireland, so the Northern Ireland drafter has never been restricted by the statutory rule against accumulations. Income could always be accumulated for the full perpetuity period, unlike in England and Wales, where this privilege was only conferred by the Perpetuities and Accumulations Act 2009. The absence of the restriction in Northern Ireland had previously resulted in some high-value English trusts having Northern Ireland governing law clauses.
In Northern Ireland, the governing legislation remains the Perpetuities Act (NI) 1966 (which is broadly commensurate with the previous English and Welsh Perpetuities and Accumulations Act 1964). The alternative fixed statutory period may be any period up to 80 years. There are plans to follow the English approach of extending the fixed period to 125 years.
General power of investment
In England and Wales, the general power of investment is found in s3 Trustee Act 2000. While Northern Ireland law also confers a general power of investment on trustees (which can be similarly excluded by express terms), it is somewhat wider than the English and Welsh provision, which prohibits trustees investing in land outside the UK. The Northern Ireland provision (s3 Trustee Act (NI) 2001) contains no such restriction. This difference stems directly from Northern Ireland’s historical and political background. When the 2001 Act was being drafted, it was considered that prohibiting the acquisition of land in the Republic of Ireland without express authorisation could simply not be justified and, accordingly, a completely unrestricted power was adopted, leaving the statutory duty of care to control the trustees’ decision as to how it should be exercised.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Sep.16, 2014