Damien Grant: King Henry didn't trust wily landowners

Jonathan Rhys Meyers played Henry VIII in The Tudors. Photo / Supplied

Opinion

Henry the VIII was a bit of a rogue but he was right about one thing: the pernicious evil of trusts. In 1535 he rammed a bill, called The Statute of Uses, through his reluctant Parliament.

Henry was grumpy because wealthy landowners were pretending to have no assets by gifting their land to a third party, often a religious order. The terms of these gifts ensured that the original landowners retained the use of their land in perpetuity.

Such constructs were called "uses" and Henry's law was designed to end the practice.

The preamble to the act denounced the offending set-up in no uncertain terms: "They being of an untrue crafte invention to put the King and his subjects from that which they ought to have righte by the good true common law of the land."

Henry did not want to end the honest use of such instruments - rather he was targeting those where the trustee (called a feoffee in Henry's day) had no real power. Alas, talented 16th-century lawyers crafted increasingly complex uses where the feoffees had real obligations, eventually leading us to the trusts we know today.

Trusts remain both popular and controversial - witness the furore over former Bridgecorp boss Rod Petricevic's legal aid appeal.

Petricevic's claim, however, was not without legal merit. He is the settlor and trustee of a substantial trust, but he is not a beneficiary. Petricevic himself is a bankrupt.

He was unsuccessful but the decision is controversial. The court looked at Petricevic's effectual control and the past actions of the trust to come to its decision. This ruling has little precedent value, given that it was confined to narrow issues of the legal aid regulations.

Although he lost, it is clear that the bankrupt Petricevic continues to enjoy the fruits of his past labours.

This was exactly the sort of chicanery that provoked Henry.

Although many are appalled at Petricevic's behaviour, placing your assets in a trust to avoid paying for residential care is equally immoral. Both are shameless attempts to cheat the state.

These days trusts are gossamer constructs largely based on contract law, Anglo-Saxon custom and an unwieldy body of often contradictory case law.

However, this may change.

The Law Commission is undertaking a review of the law of trusts and their four reports to date are comprehensive and exhaustive. The commission has yet to make its recommendations.

Given the frustrating experience of Henry VIII, it seems pointless to try to outlaw trusts, but it is time they became subject to the same registration regime that we require of companies.

They should be registered, regulated and transparent.

Those wishing to establish trusts should be forced to do so publicly.

Assets once gifted should be truly outside the control of those doing the gifting and independent trustees should be required in all cases.

Such a regime would not eliminate the abuses but a robust regime is 476 years overdue.