2 - TRUSTS THE BASICS

Which court administered equity before the Judicature Acts 1873-75?

The Court of Chancery

What major change did the Judicature Acts 1873-75 introduce?

They merged the courts of common law and equity into one system, allowing all judges to administer both.

What division of the High Court typically handles matters of equity today?

The Chancery Division 

Is equity only concerned with trusts?

No. It also applies to areas like contract law 

What happens if there’s a conflict between common law and equity?

Equity prevails

Which case established that equity prevails over common law?

Earl of Oxford’s Case (1616).

Which modern statute confirms that equity prevails?

Earl of Oxford’s Case (1616).

Which modern statute confirms that equity prevails?

Senior Courts Act 1981, section 49.

Why did equity develop historically?

To provide remedies where the common law was too rigid or unable to offer relief.

What did Maitland famously say about equity’s relationship to common law?

“Equity without common law would have been a castle in the air, an impossibility.”

What is the “fusion debate”?

The question of whether the merger of law and equity was purely administrative or substantive (whether their rules have merged)

Who described common law and equity as “two streams.. that run in the same channel, but do not mingle their waters”?

Ashburner

What recent case supported the view that the principles of law and equity remain distinct?

Brake v The Chedington Court Estate [2022] EWCA Civ 1302 (Lewison LJ).

What key question remains in the fusion debate?

Whether differences between law and equity in similar fact patterns are principled or should be removed.

What is equity?

Equity is a system of established legal rules, not just a judge’s sense of fairness.

What judge famously rejected the idea that equity varied with the judge’s discretion?

Lord Eldon in Gee v Pritchard (1818).

What did Lord Eldon say about the “length of the Chancellor’s foot”?

He rejected the notion that equity’s decisions vary arbitrarily with individual judges.

Why has the concept of “unconscionability” in equity been criticised?

because it can be vague and express a conclusion rather than a clear reasoning process

Cases discussing ‘unconscionability’ in equity-

• BCCI v Akindele [2001]

• Pennington v Waine [2002]

• Pitt v Holt [2013]

What are equitable maxims?

General principles that guide equitable reasoning (eg “ he who comes into equity must come with clean hands”

Do equitable maxims have binding legal force?

No. They explain reasoning but do not create standalone rules

Give examples of common equitable maxims

• “Equity considers done what ought to be done.”

• “Equity will not assist a volunteer.”

• “He who comes into equity must come with clean hands.”

what is an express trust?

It’s when someone intentionally sets up a trust to hold assets for another person or a charitable purpose.

Examples of where trusts are used

Family trusts, pension funds, offshore trusts, and charities.

Define a trust in legal terms

A trust is an arrangement where one person (the trustee) holds property for the benefit of another (the beneficiary) or for a charitable purpose.

what kinds of property can be held in trusts?

Personal property (like money, shares, cars) or land (freehold or leasehold

Who are the main parties in a trust?

• Settlor: Creates the trust

• Trustee: Holds and manages the property

• Beneficiary/Object: Person(s) who benefit or the purpose served

What is the “subject matter” of a trust?

The property or assets being held in trust.

Why might someone create a trust instead of giving property directly?

To manage, protect, or control how assets are used.

Why create a trust? Reason 1 – What if the recipient can’t manage the property?

A trustee can manage it on their behalf — e.g., setting up a trust for a child.

Why create a trust? Reason 2 – How do trusts offer flexibility?

Through discretionary trusts that let trustees decide who gets what and when, or split benefits over time (e.g., income for a spouse, capital for children).

Why create a trust? Reason 3 – How can trusts make management more efficient?

They allow assets to be pooled and managed by expert trustees (e.g., pension funds).

Why create a trust? Reason 4 – How do trusts protect (“ring-fence”) assets?

Assets in a trust are separate from personal assets, so they’re protected if the settlor goes bankrupt (as long as set up beforehand).

Why create a trust? Reason 5 – How can trusts affect taxation?

Trusts can reduce tax liability (though tax details are outside this course).

What is often said to happen when a trust is created?

Ownership is “split” — legal title to the trustee, equitable title to the beneficiary.

What is Burrows’ view on this “split” of ownership?

It’s a metaphor — the trustee holds full legal title, but equity gives the beneficiary rights to hold the trustee accountable.

Which case supports this view? (Burrows view)

Akers v Samba [2017] UKSC 6.

What did Lord Mance caution about the “division of title”?

It should not be seen as two separate titles — the equitable interest is “impressed” onto the legal one, not carved out of it.

What are trusts arising by operation of law?

Trusts the law imposes because of the situation, not because someone chose to create them.

What is a constructive trust?

A trust imposed to prevent unfair (unconscionable) conduct — often when someone improperly benefits from property.

Example of a constructive trust case?

FHR European Ventures LLP v Cedar Capital Partners LLC [2014] — an agent secretly took a commission and had to hold it on trust for the principal.

What is a resulting trust?

A trust that arises when property is transferred but the recipient isn’t intended to keep it — usually when there’s no clear intention or failure of purpose.

How are resulting trusts different from constructive trusts?

Resulting trusts often reflect intention (or presumed intention); constructive trusts respond to unconscionable conduct.

Are trustees agents of the beneficiaries?

No. Trustees act in their own name and are personally liable on contracts they enter — beneficiaries are not.

Can someone be both an agent and a trustee?

Yes, if the agreement between them says so — it depends on the terms of the contract.

Example of an agent acting as a trustee?

Royal Brunei Airlines v Tan [1995] — a travel agent was required to hold ticket money on trust for the airline.

What determines whether an agent holds money on trust or owes a debt?

Whether the agent must keep the money separate.

• If kept separate, → trustee.

• If free to mix it, → debtor.

Which case explains this distinction?

Henry v Hammond [1913] 2 KB 515 — if money isn’t kept separate, the agent is a debtor, not a trustee.

What does “cestui que trust” mean?

It means “beneficiary of a trust.”

What’s a key difference between a contract and a trust?

A contract is based on agreement and consent; a trust can exist even without consent (e.g., imposed by law).

Are all trusts based on intention?

No — some (like constructive or resulting trusts) arise by law, not by choice.

Can someone be both a debtor and a trustee?

Yes, in certain cases — for example, in a Quistclose trust.

What is a Quistclose trust?

When money is lent for a specific purpose, and the borrower holds it on trust for the lender until that purpose is fulfilled.

What happens when the purpose of a Quistclose trust is fulfilled?

The trust ends, and only the debt remains.

What happens if the purpose of the trust fails?

The money must be returned to the lender — the trustee’s obligation ends.

Key cases on Quistclose trusts?

• Barclays Bank Ltd v Quistclose Investments Ltd [1970]

• Twinsectra Ltd v Yardley [2002]

• Ali v Dinc [2020]