English trust law

Where it appeared "inequitable" (i.e. unfair) to let someone with legal title hold onto land, the Lord Chancellor could declare that the real owner "in equity" (i.e. in all fairness) was another person, if this is what good conscience dictated.

[20] By the late 17th century, it had become an ever more widely held view that equitable rules and the law of trusts varied unpredictably, as the jurist John Selden remarked, according to the size of the "Chancellor's foot".

At the start of the 19th century in Gee v Pritchard, referring to John Selden's quip, Lord Eldon (1801–1827) said 'Nothing would inflict upon me greater pain in quitting this place than the recollection that I had done anything to justify the reproach that the equity of this court varies like the Chancellor's foot.

Most regulation, especially after the Robert Maxwell scandals and the Goode Report,[30] was directed at ensuring that the employer cannot dominate, or abuse its position through undue influence over the trustee or the trust fund.

As Scarman LJ put it, they understood "very well indeed their own domestic situation", and even though legal terms were not used in substance this did "convey clearly a present declaration that the existing fund was as much" belonging to Ms Paul.

As the American lawyer, Lon Fuller, put it the purpose is to provide "channels for the legally effective expression of intention",[47] particularly where there's a common danger in large transactions that people could rush into it without thinking.

[56] While certainty of intention (and the formality rules) seek to ensure that the settlor truly intended to benefit another person with his or her property, the requirements of certain subject matter and beneficiaries focus on whether a court will have a reasonable ability to know on what terms the trust should be enforced.

The view that appears to have been adopted is that if assets are "fungible" (i.e. swapping them with other will not make much difference) a declaration of trust can be made, so long as the purpose of the statutory priority rules in insolvency are not compromised.

[85] The main reason for this judicial policy is to prevent, as Roxburgh J said in Re Astor's Settlement Trusts, "the creation of large funds devoted to non-charitable purposes which no court and no department of state can control".

While express trusts in a family, charity, pension or investment context are typically created with the intention of benefiting people, property held by associations, particularly those which are not incorporated, was historically problematic.

[123] Trustees are charged with the duty to manage the fund in the best interests of the beneficiaries, in a way that reflects their general and ethical preferences,[124] by investing the savings in company shares, bonds, real estate or other financial products.

[126] Because pension schemes save up significant amounts of money, which many people rely on in retirement, protection against an employer's insolvency, or dishonesty, or risks from the stock market were seen as necessary after the 1992 Robert Maxwell scandal.

In EU and UK law the umbrella term "collective investment scheme" is used to cover a range of legal entities, regardless of their form as trusts, companies or contracts, or a mixture.

Modern authors increasingly prefer to categorise resulting and constructive trusts more precisely, as responding to wrongs, unjust enrichments, sometimes consent or contributions in family home cases.

For example, in the Privy Council case of Air Jamaica Ltd v Charlton[153] an airline's pension plan was overfunded, so that all employees could be paid the benefits that they were due under their employment contracts, but a surplus remained.

Consents, wrongs, unjust enrichments, and miscellaneous other reasons are usually seen as being at least three of the main categories of "event" that give rise to obligations in English law, and constructive trusts may straddle all of them.

In a sixth situation, constructive trusts have been acknowledged to arise since the late 1960s,[183] where two people are living together in a family home, but are not married, and both are making financial or other contributions to the house, but only one is registered on the legal title.

There remains significant debate both about the proper manner of characterising constructive trusts in this field, and also about how far the case law should match the statutory regime that applies for married couples under the Matrimonial Causes Act 1973.

[199] The United Kingdom Supreme Court, however, has subsequently overruled Sinclair in FHR European Ventures LLP v Cedar Capital Partners LLC,[200] holding that a bribe or secret commission accepted by an agent is held on trust for his principal..

In Westdeutsche Landesbank Girozentrale v Islington LBC[161] Lord Browne-Wilkinson held that a constructive trust could only arise if the recipient's conscience would have been affected at the time of the receipt or before any third party's rights had intervened.

While professionally drafted trust instruments often contain a full description of how trustees are appointed, how they should manage the property, and their rights and obligations, the law supplies a comprehensive set of default rules.

The scope of compulsory terms may be subject of debate, but Millett LJ in Armitage v Nurse[204] viewed that every trustee must always act "honestly and in good faith for the benefit of the beneficiaries".

[212] On a much smaller scale than the recent economic collapse, Keech claimed he was entitled to the profits his trustee, Sandford, had made by buying the lease on a market in Romford, now in East London.

This duty was broken when the Barclays corporate trustee department, where trust assets held 99 per cent of a company's shares, failed to get any information or board representation before a disastrous property speculation.

[238] However, in the leading case, Pitt v Holt[239] the Supreme Court reaffirmed that poorly considered decisions may only become voidable (and so cannot be cancelled if a third party, like the Revenue, is affected) and only if mistakes are "fundamental" can a transaction be wholly void.

This led the Privy Council to agree that a director of an Isle of Mann company was dishonest, because, even though he did not know for sure, he was found at trial to have suspected that money passing through his hands was from a securities fraud scheme by Barlow Clowes.

Before the Supreme Court of Judicature Act 1873 and 1875, influential judges and authors, such as Edward Coke,[285] and William Blackstone, had disapproved the notion that equitable jurisdiction was in some way distinct from the law.

[287] The majority view, however, is that there is no good reason why, as Andrew Burrows has written "We do this at common law but that in equity" when the situations are functionally identical, to treat like cases alike.

Since the House of Lords and the Supreme Court declared it would overrule previous judgments that did not meet the evolving requirements of contemporary justice,[289] the notional primacy of equity over common law was effectively obsolete.

A third area of academic debate concerns the role of equitable principles or fiduciary duties in protecting the weaker party in establishing a new bill of economic and social rights: consent, autonomy and Vernon v Bethell.

Trusts and fiduciary duties matter when property is managed by one person for another's benefit. Most trust money, which is invested by financial institutions around the City 's Royal Exchange , [ 1 ] comes from people saving for retirement. [ 2 ] In 2011, UK pension funds held over £1 trillion of assets, and unit trusts held £583.8 billion . [ 3 ]
The Star Chamber (est. circa 1398) played the role of a criminal court of "equity", where judges on the king's authority could impose punishments that deviated from the law. [ 12 ] It was abolished by the Habeas Corpus Act 1640 , although in civil matters the Court of Chancery continued operation until 1875. [ 13 ]
In his book Bleak House (1853), Charles Dickens pilloried the Court of Chancery 's arcane and tedious practices, exemplified in his fictional case of Jarndyce v Jarndyce . Within two decades, Parliament abolished the court, and merged equity with the common law through the Supreme Court of Judicature Act 1873 , and its successor Judicature Acts .
Trust law plays a major role in protecting people's occupational pensions , in investments like unit trusts , and in determining " equitable " ownership when people buy, and live together in, a home.
The National Trust , now a registered charity and endorsed by several Acts of Parliament, [ 31 ] was established as a trust corporation in 1895, to hold property like Stourhead gardens (pictured) across the UK for the benefit of public recreation.
People's wills and testaments , like William Shakespeare 's will here, often present difficulties in trust law where the meaning of what is intended is not completely clear. The House of Lords, however, has said a trust should only fail if its meaning is "utterly impossible" to deduce. [ 34 ]
In the financial crisis of 2007–08 the insolvency of Lehman Brothers , whose sign was auctioned here at Christie's , led to a mass of litigation to sort out which bank investors might have sufficiently certain equitable rights in the financial assets, or who would be the unlucky unsecured creditors. [ 64 ]
Under the Hague Trust Convention , ratified by the Recognition of Trusts Act 1987 , UK law voluntarily recognises almost all trusts created overseas, in tax havens such as Bermuda, even if there are lower standards for transparency, use of assets, no requirement of beneficiaries, or nominal tax.
Political parties, like the Greens , are typically thought to hold property according to the terms of the contract of association. Property is held on trust by the treasurer for the members as a whole. [ 105 ]
Every jobholder will from 2012 be automatically enrolled in an occupational pension , and can codetermine how their retirement savings are invested and their voice in company shares is used. [ 127 ]
On Throgmorton Avenue is the London office of the world's largest fund manager , BlackRock .
The Corpus Juris Civilis (534 AD) of Justinian I (depicted left) followed Gaius ' Institutes (170 AD) by categorising the law of obligations into contracts, delicts, and "miscellaneous" others. Unjust enrichment was slowly seen as a third category, but it is controversial whether proprietary rights arise to reverse it. Resulting trusts and some constructive trusts are usually conceptualised as responding to unjust enrichment . [ 138 ]
In 1910 Frederic Maitland , in his famous lectures on Equity , [ 150 ] described resulting trusts as follows: "I have made a trustee for somebody, and a trustee he must be – if for no one else then for me or my representatives". It remains controversial whether they respond to unjust enrichment , [ 151 ] or what would have been intended by the parties. [ 152 ]
In his Commentaries (1765) William Blackstone argued all causes of actions were founded on wrongs to protect rights. Constructive trusts, however, are usually argued to arise to perfect consent based obligations, to provide a proprietary remedy for wrongdoing, to reverse unjust enrichment , and to reflect the contributions of work that people make, especially in family homes.
As the Charity Commission and The Pensions Regulator do for charities and pensions , [ 203 ] the Financial Conduct Authority in Canary Wharf enforces statutory and fiduciary duties owed by investment businesses under the FSMA 2000 . Most duties derive from trust law, but statute makes them compulsory and the regulator ensures compliance.
The South Sea Bubble by Edward Matthew Ward . After managers of the South Sea Company and its stock brokers, depicted here, created the world's first stock market crash in 1719, Keech v Sandford decided all people handling others' money must avoid all possible conflicts of interest . [ 212 ]
In 1742, Sir Robert Sutton and the other Charitable Corporation directors, who were meant to give microfinance to the poor, were found liable for the bankruptcy because of their corruption and negligence . [ 216 ] Although poor decisions were not to be judged with hindsight , Lord Hardwicke applied a strict objective standard, now in the Trustee Act 2000 section 1.
UK trust law permits ethical investment policies, to divest from assets beneficiaries object to or promote particular causes. [ 230 ] A trust deed may expressly allow it, or otherwise trustees must simply not make financially detrimental decisions and sufficiently diversify investments under the Trustee Act 2000 section 4(3). [ 231 ]
Lincoln's Inn , off Chancery Lane , London, is the traditional home of Chancery barristers.
The Chancery Court , depicted here in the early 18th century, recognised a wider variety of remedies than the common law courts.
Robert Maxwell stole the pension funds of his employees at the Daily Mirror and accidentally fell off his yacht, the Lady Mona K , near the Canary Islands . Bishopsgate Investment Mgt Ltd v Homan held Maxwell and his inheritors were strictly liable to account for misapplication of the assets. [ 256 ]
The Bank of England closed the Bank of Credit and Commerce International , the world's 7th largest in 1991, after learning it had engaged in fraud and allowed terrorist groups to open accounts. [ 269 ]
The founder of the investment company Barlow Clowes dishonestly channeled investors' money into perks for himself and his wife including a Bordeaux chateau and vineyard , before they were uncovered and prosecuted. The Privy Council advised that Isle of Mann money agents who assisted in a way honest people would think is dishonest were liable for investors' losses. [ 280 ]