When Trust Property is Registered in the Name of the Trust: The Enforcement Problem Created by the Deeds Registry

Trustee Liability in Trust Transactions

A trust cannot be sued. It is not a legal person capable of assuming rights and obligations. Where a dispute arises in relation to an ownership trust, proceedings must therefore be brought against the trustee, who is the legal actor in relation to the trust.

When a trustee enters into transactions with third parties, the trustee does so personally. The resulting obligations are therefore the trustee’s personal liabilities, even if those obligations were incurred in the course of administering the trust.

Accordingly, a creditor must bring proceedings against the trustee and judgment will be granted against the trustee personally, not against the trust. The enforcement of that judgment follows the ordinary principles of execution. A creditor executes against the property of the judgment debtor, which in this context is the trustee.

This reflects a fundamental structural feature of trust law: although the trustee acts for the benefit of beneficiaries and administers trust property, the trustee remains the legal person who contracts with third parties and who bears the legal consequences of those transactions.

The Trustee’s Right of Indemnity

Trust law recognises an important qualification to this position. Where liabilities have been properly incurred in the administration of the trust, the trustee is entitled to be indemnified from the trust assets.

This indemnity gives the trustee a proprietary interest in the trust property. In practical terms, the trustee may apply trust assets to discharge the liability or reimburse themselves where payment has already been made.

In practice, this means that although the creditor’s claim lies against the trustee personally, the trustee may rely on the right of indemnity to have the trust assets applied in satisfaction of the liability. Creditors may in turn obtain indirect access to those assets through subrogation to the trustee’s indemnity right.

This structure works coherently where the trust property is properly vested in the trustees. If immovable property is registered as ‘John Smith, in his capacity as trustee of the ABC Trust’, the public register reflects the orthodox trust structure: the trustee is the legal owner of the property.

Where the Difficulty Arises

The position becomes conceptually more difficult where immovable property is registered simply in the name of the trust itself. Even in that situation, the law still requires proceedings to be brought against the trustee because the trust itself is not a legal person capable of being sued. Judgment will therefore still be granted against the trustee personally.

However, the trustee’s right of indemnity depends on the existence of trust assets vested in the trustee over which the trustee’s equitable charge or lien may operate. Where the property register does not identify the trustee as the legal titleholder, the trustee’s proprietary interest becomes difficult to locate within the formal structure of the register.

If the trustee does not appear as the legal owner of the immovable property said to form part of the trust estate, the proprietary foundation of the indemnity becomes conceptually uncertain.

This creates a disconnection between liability and title. The trustee remains the contracting party, the judgment debtor and the holder of the indemnity right, yet the register records ownership in the name of the trust itself.

Concluding Observation

Where trust property is properly vested in the trustees, the structure of trust law operates coherently. The trustee is the legal actor in relation to the trust, creditors obtain judgment against the trustee personally, and the trustee’s right of indemnity allows trust assets to be applied in satisfaction of liabilities incurred in the administration of the trust.

Where property is registered simply in the name of the trust, the register does not reflect the trustee as the legal holder of the trust assets against which that indemnity is meant to operate. The practical question therefore becomes straightforward: if the trustee’s indemnity is the mechanism through which trust assets answer for liabilities, how does that mechanism operate where the property register does not identify the trustee as the legal owner of those assets?