FACULTY OF JURIDICAL SCIENCES

E- CONTENT
COURSE: BALLB-Vth Sem

SUBJECT: EQUITY AND TRUST

SUBJECT CODE: BAL 506

NAME OF FACULTY: DR. ANKUR SRIVASTAVA
BRAND GUIDELINE
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Lecture-31
 LECTURE-31

INTRODUCTION TO TRUSTS
Taken simply, a trust enables more than one person to have
rights in the same property simultaneously. A trust permits a
division in the ownership of the trust property between a
trustee and beneficiary so that the trustee is compelled to act
entirely in the best interests of the beneficiary in relation to
the management of whatever property is held on trust.

A legal trust ownership is divided between two

individuals that are called trustee and beneficiary.

The role of management is vested in a person called a

trustee. The trustees (hold legal titles) have agreed to hold
and manage the legal title for the benefit of beneficiaries and
their conscience binds them in equity.

The enjoyment of the thing subject to the trust is vested

in persons called beneficiaries (equitable titles), thereby
giving the beneficiaries an equitable interest in the property
subject to the trust.

Panesar defines a trust as:

• “an equitable obligation, binding on a person ( who is
called trustee) to deal with property over which he has
control (which is called the trust property), for the benefit of
person (who are called beneficiaries), of whom he may
himself be one, and any one of who may enforce the
obligation. Any act or neglect on the part of the trustee
which is not authorized or excused by the terms of the trust
instrument, or by law, is called a breach of trust”.
Maitland suggested that the definition of a trust as:
‘’When a person has rights which he is bound to
exercise upon behalf of another or for the accomplishment of
some particular purpose, he is said to have those rights in
trust for that other or for that purpose and he is called a
trustee.’’

Sir Arthur Underhill:

‘’A trust is an equitable obligation binding upon a person
(who is called a trustee) to deal with property over which he
has control (which is called the trust property) for the benefit
of persons (who are called beneficiaries) of whom he may
himself be one, and any one of whom may enforce the
obligation.’’

Lord Justice Millett stated:

‘’A trust exists whenever the legal title is in one party
and the equitable title in another. The legal owner is said to
hold the property in trust for the equitable owner.’’

Tomas and Hudson define a trust as:

An ‘’imposition of an equitable obligation on a person
who is the legal owner of a property (a trustee) which
requires that person to act in good conscience when dealing
with that property in favour of any person (the beneficiary)
who has a beneficial interest recognised by equity in the
property.’’
Essentially the trustee is said to ‘’hold the property on
trust’’ for the beneficiary.

A trust permits a division in the ownership of the trust

property between a trustee and a beneficiary so that a
trustee is obliged to act in the best interests of the
beneficiary in relation to the management of whatever
property is held on trust.

Essentially a trust is concerned with the utilisation and

preservation of wealth It can be deduced from the various
definitions offered above, that there are in fact two
fundamental features of the trust:
1) A person holds property rights for a person or purpose
– the property component; and
2) That person is obliged in equity to exercise those
rights for that person or purpose – the obligation component

Development of the concept

Nowadays the doctrine of trusts is different from its
initial inception and is used commonly in commerce and is a
tool in holding and managing property.
• Trust originated from medieval practice called ‘’the use’’;
effect of a transfer was that third parties became owners of
the property in law but for the benefit or use of somebody
else. This idea of ‘’split ownership’’ emerged whereby the
person who went away on crusades was regarded as the
owner of land in equity whilst the person looking after the
land was treated as being the owner of the land by the
common law courts
• If the person going away (settlor) transfers land to another
party (trustee) but does so for the use and benefit of
somebody else (beneficiary). The trustee receives the
property knowing that they cannot do what they want for it;
issue of conscionability comes into play. This device arose so
as to bypass the feudal laws that would have otherwise taken
property away from the settler.
• Much of the development has been in the tying up of
family wealth
• They can even allow a settler to allow secretly for an
illegitimate child to be provided for Revolves around notion
of settling property on trustees:
• Assets can be held by trustees to protect and for the
benefit of minors; settlor or trustee can look after the
property for the beneficiary in cases where the beneficiary
isn’t capable of doing so for themselves; diverse ways in
which it can be used Trust is a creature of equity as opposed
to the common law; before the judicature acts, the
chancellor’s decision was unclear but nevertheless he would
step in where it would be unconscionable to otherwise allow
a person to rely on his legal rights. Trustee may have legal
title but the beneficiaries have the equitable interest in the
property • Issues arise whereby the trustee attempts to
utilise the property in a manner to his own liking, at this point
equity will step in where it would be unconscionable to allow
the trustee to use the fact he has legal title to the
disadvantage of the beneficiary
• Equity will not allow the trustee to go back on their word
where it affects their conscience
• Even though the rights of enforcement would be given in
personum by the chancellor, he would enforce it against any
other person who moves to take the land away from the
beneficiary whose right is in the property.
• Beneficiary has a right in wren; meaning the right is in the
property as opposed to merely against an individual. If you
are a beneficiary under a trust, your right is immense in terms
of the property in that it persists against anyone who seeks
to take the property, except ‘’equity’s darling’’ who is a
person who takes trust property without any notice that
there were any beneficiaries involved. As a beneficiary your
right will not persist against the darling but will against
anybody else.

The case of Re Bowden made it clear that the trust is a

triangular relationship between the settler (absolute owner
of the LEGAL AND EQUITABLE TITLE), the trustee (legal title
only) and the beneficiary (who has equitable title only).

The trust in comparison with other legal concepts

• Debt cannot be subject to a trust.
• Main distinction is between who can enforce a
contract of trust; old rules of privity (now set aside) are in
contrast to a trust as a beneficiary has always been able to
enforce the trust obligations.
• Key difference is the right to enforcement. Under a
contract you only have a right to sue a person whereas as a
beneficiary as long as the property is there you are able to
follow through and obtain it
• In terms of a debt, the trust is of particular objects as
opposed to the subject matter per se. if the trust is validly
created the objective is to give
• As a beneficiary you are in a much better position than
any other type of creditor, such as in Re Kayford money was
held not to form part of the company’s general assets as it
was paid by people into a trust account How does a trust
come into existence?
• Either by virtue of having been established expressly
by a person (the settlor) who was the absolute owner of
property before a trust was created. Or by an action of the
settlor which the court interprets to have been sufficient to
create a trust but which the settlor himself did not know was
a trust.
Lord Browne-Wilkinson in WestdeutscheLandesbank v
Islington LBC stated how the relevant principles of trust law
are:
1) It operates on the conscience of the legal owner,
whose conscience requires them to carry out the purpose for
which the property was vested in them in the first place, or
which the law imposes on his due to their unconscionable
conduct
2) A person cannot be a trustee of the property if they
are ignorant of the facts alleged to affect his conscience.
3) There must be identifiable trust property in order for a
trust to be established.
4) From the date of the establishment of a trust the
beneficiary has a proprietary interest in the trust property
which will equitably be enforceable against any subsequent
holder of the property.

MCQs
1. There must be identifiable trust property in order for a
trust to be established.
i. True
ii. False
iii. Cannot say
 iv. None of these
2. There must be identifiable trust property in order for a
trust to be established.
i. True
ii. False
iii. Cannot say
iv. None of these
3. Debt cannot be subject to a trust.

i. True

ii. False
iii. Cannot say
iv. None of these
4. Main distinction is between who can enforce a contract
of trust; old rules of privity (now set aside) are in
contrast to a trust as a beneficiary has always been able
to enforce the trust obligations.
i. True
ii. False
iii. Cannot say
 iv. None of these
5. A legal trust ownership is divided between two
individuals that are called trustee and beneficiary.
i. True
ii. False
iii. Cannot say
iv. None of these

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