​Equity and Trust – Declarations


Case Scenario


The trustees of the Hamilton Family Trust manage a large investment portfolio for retired beneficiaries. The trustees disagree about whether the trust should invest in companies connected to fossil fuels and arms manufacturing.


Some trustees believe these investments are profitable and necessary to maximise returns for beneficiaries. Others refuse to approve the investments because they object on ethical grounds.


At the same time, the trust owns a historic family estate that has become extremely expensive to maintain. The trustees wish to sell the property to preserve the remaining trust assets, but the principal beneficiary strongly opposes the sale and repeatedly threatens legal action against the trustees.


The trustees are uncertain whether their proposed actions are lawful and seek guidance from the court.


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Declarations


Definition


A declaration is an equitable remedy in which the court formally states the legal position or clarifies the rights, duties, or obligations of the parties.


Unlike damages or injunctions, a declaration does not directly order compensation or compel conduct.


Instead, the court declares:

• what the law is;

• how it applies;

• whether conduct is lawful;

• or how trustees should act.

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Purpose of Declarations


Declarations are commonly used where:

• trustees require legal guidance;

• uncertainty exists about trust powers;

• beneficiaries challenge trustee decisions;

• trustees seek court approval before acting.

The remedy helps trustees administer trusts safely and properly.


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Why Declarations Are Important


Although declarations may appear less forceful than injunctions or compensation, they are extremely important because they:

• clarify trustees’ duties;

• reduce litigation risk;

• protect trustees from later claims;

• confirm whether proposed conduct is lawful;

• guide future trust administration.

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Practical Application


Ethical Investments


In the scenario, trustees disagree about ethical investments.


The court may issue a declaration clarifying:

• whether trustees must prioritise financial benefit;

• whether ethical concerns may properly influence investment decisions;

• whether refusal to invest constitutes breach of trust.

This resembles Cowan v Scargill.


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Cowan v Scargill


Principle


The case concerned trustees of a miners’ pension fund.


Some trustees refused certain overseas and energy investments for ethical and political reasons.


The court declared that the trustees were in breach of trust because trustees generally must act in beneficiaries’ best financial interests.


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Key Principle From the Case


Trustees must normally:

• prioritise beneficiaries’ financial welfare;

• act prudently;

• avoid allowing personal ethical views to override beneficiary interests.

However, modern trust law recognises some limited scope for ethical investing where consistent with beneficiary interests and trust purposes.


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Difficult Administrative Decisions


Sale of Trust Property


In the scenario, trustees want to sell an expensive estate to preserve trust funds.


Because the principal beneficiary opposes the decision and threatens litigation, the trustees seek a declaration confirming that the proposed sale is lawful and properly exercised.


This resembles Cotton v Earl of Cardigan.


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Cotton v Earl of Cardigan


Principle


Trustees administering an impoverished estate sought court approval for sale of estate property.


The principal beneficiary repeatedly challenged the trustees’ actions.


The court’s declaration helped confirm that the trustees’ decision was properly made and protected them from further claims.


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What Declarations Can Clarify


Courts may declare:

• scope of trustee powers;

• validity of trustee decisions;

• proper interpretation of trust terms;

• rights of beneficiaries;

• legality of proposed transactions;

• duties owed by trustees.

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Difference Between Declarations and Other Remedies


Declaration


States legal rights or duties.


Does not necessarily compel action.


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Injunction


Orders someone:

• to stop doing something; or

• to perform a positive act.

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Specific Performance


Compels performance of contractual or trust obligations.


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Equitable Compensation


Provides monetary recovery for losses caused by breach.


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Solving the Scenario


Ethical Investment Dispute


The court may declare:

• trustees must prioritise beneficiaries’ financial interests;

• refusal to adopt reasonable investment strategy may breach trust duties.

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Proposed Sale of Estate


The court may declare:

• the trustees acted properly;

• the sale falls within trustee powers;

• the decision is lawful and prudent.

This protects trustees against future claims by dissatisfied beneficiaries.


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Key SQE Principles


Declarations:

• are equitable remedies;

• clarify legal rights and duties;

• are especially important in trust administration;

• help trustees avoid liability;

• provide guidance where uncertainty exists.

Trustees frequently seek declarations before taking controversial or high-risk decisions.


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Further Research


Important Cases


Cowan v Scargill


Important for:

• ethical investment;

• trustees’ duties;

• beneficiaries’ financial interests.

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Cotton v Earl of Cardigan


Important for:

• trustee protection;

• sale of trust property;

• court guidance in difficult administration decisions.

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Nestle v National Westminster Bank plc


Important for:

• trustee investment duties;

• standard of care;

• prudent investment principles.

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Conclusion


Declarations are an important equitable remedy allowing courts to clarify the law and guide trustees in difficult or uncertain situations. Although they do not directly compel conduct or award damages, declarations play a vital role in protecting trustees, resolving disputes, and ensuring proper trust administration.