Is there a single explanation which adequately captures the nature of a beneficiary’s rights under a trust?
No traditional explanation in English law adequately captures the nature of beneficial rights under a trust. Traditionally, Roman law categorised rights into rights in personam and in rem. However, equity has made these terms unsuitable for modern property law, where beneficial interests under a trust has gradually changed from purely personal rights to something close to property rights. In reality, the nature of beneficial rights are best captured as sui generis rights, where rights are not attached to property but flow from the rights of the trustee. This explanation is adequate in theory, but may be difficult to advance in practice. 
Problems with existing explanations
1) Personal rights
There are three key demonstrations that the rights under a trust (beneficial rights) are stronger than personal rights. Firstly, beneficial rights bind anyone to whom the property is transferred, except for bona fide purchasers for value (BFP). Maitland suggests that this simply demonstrates a unique type of personal rights, where the beneficiary (B) has rights against any person that has undertaken the trust and all that claim through or under her. However, Maitland’s position does not explain how a B can take priority in a bankruptcy situation, as creditors of the trustee surely have not undertaken the trust. Moreover, priority conflicts between competing equitable rights are not representative of personal rights where a pari passu approach to asset distribution is adopted. It is clear that the personal rights explanation of beneficial interests cannot singularly capture the nature of rights under a trust.
2) Proprietary rights
Nolan suggests that the most important feature of beneficial rights is its negative aspect; these rights can exclude third parties from the trust property. He argues that this renders beneficial rights as proprietary, which explains why a B can sue a third party and take priority over the trustee’s creditors. This view has seen support in the case law, Lord Sumption in Akers v Samba Group states that ‘the proprietary character of an equitable interest in property… must be regarded as settled’. Nevertheless, property rights do not singularly capture the nature of beneficial rights. Even outside of BFPs, B only has a claim against those that derive their titles from the trustee. Thus, B cannot claim against an adverse possessor or against someone who innocently interferes with the property with the agreement of the trustee. Beneficial rights are weaker than legal ownership.
However, proprietary rights are not only embodied by their exigibility. Using the ‘numerus clausus’ principle in National Provincial Bank v Ainsworth property rights must be 1) definable, 2) identifiable by third parties and 3) capable in its nature of assumption by third parties. Regarding (1) and (2), although rights are definable, some Bs never find out they have a beneficial interest or may never acquire these rights, rendering them unidentifiable. Regarding (3), Jaffey argues that beneficial rights satisfy the principle of ‘ownership’, even if fragmented. Thus, as ownership is capable in its nature of assumption by third parties, this 3rd limb is satisfied. However, this does not reconcile with the nature of charitable trusts as these do not deliver ‘ownership’ in any sense. Beneficial rights are therefore something other than property rights.
Sui generis rights?
This term has been supported by Pettit, who argues that equitable interests are sui generis rights which form a hybrid of both personal and proprietary rights. This analysis has been advocated by McFarlane and Stevens, who refer to ‘persistent rights’. These are rights that do not attach to a res but instead flow from the rights of another, unlike proprietary rights, which attach to property. Where the trustee transfers the property to a third party, B’s right can follow the legal title and bind the third party. This explains why B does not have an action against a thief or adverse possessor, there is no connection between the thief’s interference of the property and B’s right to the property, so instead B will have to sue the thief through enforcing her rights over the legal title. This would mean getting the third party or trustee to sue through their legal title attached to the property. This is a convincing argument, it explains why Bs enjoy weaker rights under discretionary trusts and mere powers as the trustee owes other duties in respect of their property right. It also solves why a beneficial interest can bind certain third parties but not others, which is at the root of why personal and property rights explanations fail here.
However, this view is not convincing to everyone. Penner believes that the beneficial interest is an indirect right in the trust assets, thus B can assert her right against third parties through the trustee. This is a property right because B’s rights turn on what happens to the property, rather than what happens to the trustee. However, this argument is not convincing. B still needs to assert her right against the trustee’s right, she cannot directly trace her ‘property’ into the hands of the third party. Zaccaria believes that this can still be captured by property rights, as equity created the structure of the trust to allocate these different fragments of ownership. Therefore, if B were to sue the tortfeasor directly, she would be overriding the discretion of the trustee, disregarding the structure of the trust. Nevertheless, this argument does not align with the nature of legal property rights, where ‘structures’ of ownership do not exist. The fact that equity has created a separate structure for trusts outside of legal ownership demonstrate how beneficial rights cannot be singularly explained by traditional proprietary theory. They are in essence, unique and form a sui generis category of rights.
Is this adequate?
The sui generis viewpoint is therefore the best explanation in capturing the nature of beneficial rights. However, is it adequate? In theory, perhaps, as it answers the questions left open by the personal and property rights analysis. However, in practice, this concept is seemingly alien to English law. Courts and statute law have spent years applying principles of property law, it is unlikely that they will retreat from established rules and accept a new form of unfamiliar rights. Zaccaria thus puts forward an alternative viewpoint which aims to fit beneficial rights within established property law. Here, B does not acquire an interest in the property, but an interest in a sub-property which derives from the property immediately above it. This sub-property could be the trustee’s management right in the property, which allows B to enforce her rights against the trustee to enjoy or transfer the property.
However, it is argued that this is a very strenuous way to fit beneficial rights into proprietary rights. Zaccaria argues herself that the only difference between her analysis and the persistent right view is the ‘proprietary’ nature instead of the ‘sui generis’ characteristic of the right. She prefers the sub-property view as it fits better with English legal principles of property rights which have been applied for years. But surely this artificial conception of sub-property also does not align with English legal principles, where rights are attached to property instead of abstract concepts like ‘management’? In practice, this conception does not improve on the practical deficiencies of the persistent rights theory, rendering it equally as inadequate.
To conclude, there is no single explanation that adequately captures the nature of beneficial rights. The best explanation is the persistent rights theory which solves the problems found in the personal and property explanations. However, this view will likely be inadequate in practice – English law is very accustomed to principled concepts of property law, and it is unlikely that this will change anytime soon.
The writer, Simrhan Khetani, is a law graduate from the University of Cambridge and future trainee solicitor at Akin Gump LLP. She has a keen interest in Equity and Trust law and will be pursuing this interest in her work as a solicitor.
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