Traditional International Political Economy and Sham Trusts and Precatory Words: An Examination
The most important actor in a mercantilist economy is the state. The most important actor
in an economy that proffers liberalism is the individual. (Oatley, International Political
Economy, Fourth edition
Liberalism and mercantilism are schools of though that delineate a framework that allows
the evaluation of the consequences of allocating various resources, such as the
International Monetary Fund or governments themselves.
In traditional mercantilism, national power is at the crux of the resource allocation, opining
whether there is some alternative allocation of resources that would enhance the nation’s
power in the international system. (Oatley)
In traditional liberalism, the welfare consequences of resource allocation are examined.
So for example the liberalist economy will seek to enable an alternative allocation of
resources that would improve society’s standard of living. (Oatley).
In turn, this short paper will examine these schools of thought applied to sham trusts and
precatory words in English law.
Precatory words are words of request or prayer in wills, like saying “ I give my dearly beloved
wife the whole of my property feeling confident that she will act justly to our children”
Mussoorie Bank Ltd v Raynor 1882. Judges have tended to adopt the attitude, especially by
the House of Lords, that there is no such thing as precatory trusts and abolished the
doctrine altogether.
Sham trusts are equitable property transactions the written terms of which purport to
divest the settlor of his interest in the trust property but in reality do not do so because the
settlor had no intention to create a trust of the kind that the written terms represent.
Certainty of intention is critical to English trusts law (The Law of Trusts, JE Penner, Oxford,
8th edition). Although sometimes, despite the House of Lords ruling strictly against
precatory words in Comiskey v Bowring-Hanbury 1905, it is difficult to tell whether
someone intended to declare a trust or merely states an intention to make a future gift.
If the courts were to take a traditional liberalist approach, they are more likely to construct
trusts. In this light, the case of Burrough v Philcox 1840 can be seen as an example of the
courts looking to seek an alternative allocation of resources that would improve the overall
of society’s standard of living, and not merely looking to the intention of the testator. Here
the instruction in the will stated that “but in case my son and daughter should both of them
die without leaving lawful issue, then for the said estates to be disposed of as shall behereinafter mentioned, that is to say, the longest liver of my two children shall the power by
a will, property attested, in writing, to dispose of all my real and personal estates amongst
my nephews and nieces or their children, either all to one of them, or to as many of them as
my surviving child shall think proper”. The court here found a general intention , viewing the
trust instrument through a liberalist lens, that the class of nieces and nephews and their
children, all of them , should benefit.
As per Lord Cottenhman, “the Court will carry into favour the general intention and will not
permit the objects of the power to suffer by the negligence of the donee” and the court was
at the time historically, more likely to find trusts in order to benefit society.
If the courts were to take a traditional mercantilist approach, the state would benefit more,
resultantly finding less trusts. For example, in Re Weekes’ Settlement 1897, a testatrix left
property to her husband stating he had a “power to dispose of all such property by will
amongst our children in accordance with the power granted to him as regards the other
property which I have under my marriage settlements”. The husband died intestate and
there was no gift over, so the children argued that the testatrix’s words indicated a general
intention that the husband should leave the property to all the children in equal shares if he
did not appoint particular shares to them. The court did not find in favour of the children,
as it did not find it possible from the document to construe that the property should be held
on trust for all the children jointly if he did not appoint.
Arguably, the court here took a mercantilist approach , leaving the children intestate and
not finding a trust instrument in their favour, as the proper objective of economic policy
should be to enhance the power of the nation state in the international state system.
Finding a trust instrument here would have instead been looking to enhance aggregate social welfare.