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A Better Understanding of Dual Ownership of Trust Property And A BETTER UNDERSTANDING OF DUAL OWNERSHIP OF TRUST PROPERTY AND ITS INTRODUCTION IN CHINA THROUGH COMPARATIVE STUDIES by Ruiqiao Zhang Faculty of Law McGill University, Montreal August 2014 A thesis submitted to McGill University in partial fulfillment of the requirements of the degree of Doctor of Civil Law (DCL) © Ruiqiao Zhang, 2014 Table of Contents ABSTRACT ................................................................................................................................... 1 ACKNOWLEDGEMENTS ......................................................................................................... 1 INTRODUCTION ........................................................................................................................ 1 I COMMON LAW TRUST AND ITS DUAL OWNERSHIP .................................................. 5 1. Definitions and the Nature of the Common Law Trust ..................................................... 5 A. Definitions of the Common Law Trust ................................................................................ 5 B. The Nature of the Common Law Trust ................................................................................ 7 2. The Concept of Dual Ownership in Common Law ............................................................ 9 3. The Legal Ownership of Trust Property ........................................................................... 12 A. A Trust Does Not Fail for Want of a Trustee .................................................................... 13 B. The Trustee’s Title to the Trust Property .......................................................................... 14 C. The Trustee’s Equitable Obligation .................................................................................. 26 4. The Equitable Title to Trust Property .............................................................................. 36 A. The Nature of a Beneficiary’s Rights ................................................................................ 37 B. The Beneficiary’s Specific Rights ...................................................................................... 40 II THE INTRODUCTION OF TRUSTS INTO CIVIL LAW AND ITS OWNERSHIP OF TRUST PROPERTY .................................................................................................................. 46 1. Difficulties and Necessity of the Introduction of Trusts into Civil Law ......................... 46 A. Difficulties with the Introduction of Trusts into Civil Law ............................................... 46 B. Necessity and Significance of the Introduction of Trusts into Civil Law .......................... 50 2. Possibility of the Introduction of Trusts into Civil Law .................................................. 51 A. Possibility of the Introduction of Trusts from a Theoretical Perspective and the Notion of Special Patrimony .................................................................................................................. 52 B. The Possibility of the Introduction of Trusts from a Practical Perspective ...................... 56 3. Introduction of Trusts into Civilian Jurisdictions in General ........................................ 59 A. Introduction of Trusts into a Pure Civil Law Jurisdiction ................................................ 60 B. Introduction of Trusts in Mixed Jurisdictions ................................................................... 66 4. The Scottish Theory of Trusts ............................................................................................ 74 A. Different Theories of Ownership Developed in Scotland .................................................. 75 B. Fiduciary Ownership in the Mixed Scottish Legal System ................................................ 80 5. Ownership of Trust Property in Quebec Law .................................................................. 89 A. Regulations of Ownership of Trust Property pre CCQ ..................................................... 91 B. Regulations of Ownership of Trust Property in the CCQ ................................................. 94 III TRUSTS AND OWNERSHIP OF TRUST PROPERTY IN CHINA ............................ 109 1. History of Trusts in China, Legal Reforms of Chinese Trust Business, and the Drafting of Trust Law of China ........................................................................................................... 110 2. Notion of Trusts in China and Difficulties in the Introduction of Trusts .................... 116 A. Notion of Trusts in China – Trust and Investment Companies ....................................... 116 B. Difficulties in the Introduction of Trusts ......................................................................... 122 1 3. Regulations of the Trust Law of China ........................................................................... 123 A. Definition, the Creation, and the types of Trusts in China .............................................. 123 B. Rights and Obligations of the Settlor .............................................................................. 127 C. Rights and Duties of the Trustee ..................................................................................... 131 D. The Capacity and Rights of the Beneficiary .................................................................... 142 E. Termination of Trusts and the Charitable Trusts ............................................................ 146 F. Remedies for a Breach of Trust ....................................................................................... 148 4. Uncertainties of the Chinese Trust System ..................................................................... 158 A. Ambiguous Ownership of Trust Property ........................................................................ 158 B. Outstanding Characteristic of the Beneficiary’s Right ................................................... 165 C. The Registration System of Trust Property Exists in Name Only ................................... 167 IV A BETTER UNDERSTANDING OF DUAL OWNERSHIP IN CHINA ...................... 171 1. Possibilities to Distill the Trust and Its Dual Ownership into China ........................... 172 A. Dual Ownership is a Misunderstanding of the Common Law Trust ............................... 172 B. Renovations or New Judicial Interpretations of Trusts are Required to Fit into Modern Development ........................................................................................................................ 178 2. Trusts Without a Theory of Dual Ownership – Possible Designs in General .............. 179 A. Transfer Ownership to Beneficiaries ............................................................................... 181 B. Settlor’s Retention of Ownership ..................................................................................... 182 C. Ownerless Trust Property ............................................................................................... 185 D. Transfer Ownership to Trustees ...................................................................................... 187 3. Design of the Binary System of Real Rights and Personal Claims in China ............... 189 A. The Binary System of Real Rights and Personal Claims Plays the Same Role as Dual Ownership ............................................................................................................................ 190 B. Accommodate Legal Ownership as Trustee’s Unitary Ownership in China .................. 193 C. Accommodate Equitable Title as a Special Personal Claim in China ............................ 198 CONCLUSION ......................................................................................................................... 210 ANNEX ...................................................................................................................................... 213 BIBLIOGRAPHY ..................................................................................................................... 236 2 ABSTRACT A main characteristic of the common law trust is the concept of dual ownership. This concept establishes a distinction between a trustee’s legal ownership of the assets of the trust and a beneficiary’s equitable title to those same assets. In civilian systems, however, because ownership is considered absolute and indivisible, no similar division of legal and equitable title is possible. This difference in the conception of ownership between the civilian and common law systems raises great challenges in fitting the concept of trusts, into civilian systems such as China’s. This thesis attempts to provide readers with a better understanding of the system of dual ownership of trust property. Through comparative studies, it discusses the best way that the trust can be incorporated in China. It argues that the concept of dual ownership is not an obstacle to the introduction of the trust in civilian jurisdictions. Using an analysis that focuses on comparing function, rather than form, the thesis argues that the key to understanding the interpretations of dual ownership in China is through an explanation that can be called the ‘binary system of real rights and personal claims’. On this approach, the common law’s legal ownership corresponds to a civilian trustee’s unitary ownership in real rights, and the common law’s equitable ownership corresponds to a special kind of personal claim. 1 RÉSUMÉ L’une des caractéristiques principales
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