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Lending to a Trust

Hans Tjio

National University of Singapore (NUS) - Faculty of Law

Trust Law International, Vol. 19, No. 2, Spring 2005

The use of trading or business trusts in the Commonwealth has created difficulties for creditors accustomed to lending to incorporated entities, where they have direct claims ultimately enforceable against a separately constituted fund. In contrast, creditors lending to a trust have first to look to the trustee for repayment. They are able to reach the trust fund only indirectly through being subrogated to the trustee's right to be indemnified from the fund in incurring the debt. That right, however, presupposes that the trustees have acted properly in administering the trust, and may consequently be lost or unavailable without a creditor realising it. It is suggested here, as is the case with the corporate form, that a creditor should be able to enforce its claims directly against the trust fund even where the trustee has acted wrongfully or without authority, so long as the creditor was unaware of any breach of duty by the trustee or limitations on its authority.

Number of Pages in PDF File: 22

Keywords: General, property law, corporation and securities law, personal bankruptcy law

JEL Classification: K10, K11, K22, K35

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Date posted: July 14, 2005  

Suggested Citation

Tjio, Hans, Lending to a Trust. Trust Law International, Vol. 19, No. 2, Spring 2005. Available at SSRN: http://ssrn.com/abstract=755265

Contact Information

Hans Tjio (Contact Author)
National University of Singapore (NUS) - Faculty of Law ( email )
469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776

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