| Depending on whether the trustee is the one who promises return to the beneficiary, promised return trusts can be divided into direct promised return trusts and indirect ones. Current criticisms on promised return trusts fail to distinguish mandatory rules from default rules and confuse validity control with performance control and, as a result, are unable to negate the validity of promised return trust. Recent changes in Chinese law regarding the validity of promised return trusts have departed from two doctrines in English trust law, namely, the doctrine of mutual exclusivity of trust and debt and the doctrine that beneficiaries are not personally liable to each other. The true cause of the changes is the partial embracement of the regulatory position by the trust law judicature. In interpreting Article 90 and Article 92 of the Minutes of the National Courts’ Civil and Commercial Trial Work Conference, courts should adopt the purposive approach, rather than the textual approach, and, in particular, should use the systemic risk as the criterion for determining the validity of various types of promised return trusts. When carrying out a taxonomy-based interpretation of validity, apart from applying the test of determining the system risk, the converting of void juridical acts and the partial voidness of juridical acts can be referred to as supplementary grounds. |
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