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About this book

This textbook is an ambitious and engaging introduction to the more advanced writings on equity and trusts, primarily designed to allow students to ‘get under the skin’ of the topic and begin to build their critical thinking and analysis skills. Each chapter is structured around key questions and debates that provoke deeper thought and, ultimately, a clearer understanding.

The aim of the book is therefore not to present a complete overview of theoretical issues in equity and trusts, but rather to illustrate the current debates which are currently going on among those working in shaping the area. The text features summaries of the views of notable experts on key topics and each chapter ends with a list of guided further reading.

Table of Contents

Introduction

Introduction

Abstract
This book is about ‘Equity’ and about ‘Trusts’, and not simply about ‘Trusts Law’. Consequently, the very title of this book takes a side in one of the key debates about this subject: is trusts law a technical area in its own right, or can it only be understood properly as part of the more general field of equity? And why do some commentators criticise the very idea of equity? The explanation as to why this book considers equity and trusts law together will take most of the rest of this book to explore, but we can summarise it here. In short, it is because the trust can be understood as a coherent whole — spanning both express trusts and trusts implied by law — only if it is understood as being predicated on a philosophical construct of equity which is in turn based on ensuring the conscionable behaviour of the defendant who will consequently act as trustee.1If trusts law is understood simply as a series of discrete rules disconnected from their roots then many of the principles will make little coherent sense.
Alastair Hudson

The Sources and Nature of Equity

Frontmatter

1. The Nature Of Equity

Abstract
Equity is the means by which English law achieves fair outcomes in situations in which the formal rules of statute or the common law would otherwise be unfair. More precisely, equity is concerned with ensuring good ‘conscience’. At one level, that is a perfectly accurate summary of the original purpose and role of equity within English law. However, equity’s offspring over the centuries have frequently developed to such an extent that they exhibit some of the characteristics of idealised common law doctrines: such as rigidity and a tight observance of precedent. The best example of this tendency is the express trust (discussed in Chapters 4, 5 and 6) because express trusts are predicated on requirements of ‘certainty’, rules governing their perpetuity, and the minimum requirements of the rights of beneficiaries before an express trust may be valid. Nevertheless, there are still many equitable doctrines which appear to operate on very general principles which give ostensibly wide discretion to judges: such as constructive trusts, proprietary estoppel, injunctions and so forth.
Alastair Hudson

2. The Nature of Trusts Law

Abstract
This chapter considers the nature of the trust and the nature of trusts law in consequence. The purpose of this chapter is to establish some key themes which will run through the debates in Part 2 (Chapters 4–11) of this book: those debates relate to particular aspects of trusts law. The previous chapter considered the nature of equity and conceived of trusts law as being a part of equity. Within that discussion, however, was a suggestion that there is something about trusts law which is paradoxical or awkward to categorise as a result of trusts law being both a part of equity and yet being comprised of some detailed rules which seem at odds with the caricature of equity as a zone of discretionary principles. Unpacking that aspect of trusts law is the underlying goal of this chapter.
Alastair Hudson

3. The Unjust Enrichment Insurgency

Abstract
A key theme in the debates about equity, especially in relation to trusts implied by law such as constructive trusts and in relation to tracing, has been the development of an entirely new way of explaining how many of the doctrines which are currently part of equity (and part of contract law and tort law) should be organised and understood. This has ignited debates about the organisation of ‘private law’ — that is, everything that is not criminal law nor public law. That new way of thinking has taken many different names over the years: ‘the law of restitution’, ‘the law of restitution of unjust enrichment’, ‘the law of unjustified enrichment’, and ‘the law of unjust enrichment’. The changes in name reflect two things: the evolution of that way of thinking among its adherents, and also disagreements between its adherents as to the way in which it should operate. In this book it will be referred to as ‘unjust enrichment’ for ease of reference, with many of the subdivisions of opinion being considered separately. It is given such prominence in this book because its feasibility and its structure have been such a large part of the academic debates about equity and trusts in the last three decades.
Alastair Hudson

Doctrinal Issues within Trusts Law

Frontmatter

4. Certainties

Abstract
The rules which are often known as ‘the three certainties’ are at the heart of express trusts law. Usually they are one of the first sets of rules which are taught to undergraduate students of trusts law. The basic rule is this: before a valid express trust can be created, three prerequisites must be satisfied. Classically, those prerequisites are understood as follows. First, it must be certain that the settlor intended to create a trust, as opposed to intending to establish some other legal or equitable mechanism (such as a charge or a gift). Secondly, the identity of the property which is to be held on trust must be certain; that is, it is commonly said, the trust fund must be segregated from all other property. Thirdly, the identity of the people who are to be the beneficiaries (or, objects) of the trust must be known with sufficient certainty. These doctrines are known respectively as certainty of intention, certainty of subject matter, and certainty of objects. What is remarkable about them, perhaps, is that they immediately establish the law of trusts as being concerned with the sort of strict rule-making which is often identified with idealised common law doctrines, as opposed to the sort of loose principles which are often associated with equity, as was discussed in Chapter 1.
Alastair Hudson

5. The Beneficiary Principle and International Trusts Law

Abstract
This chapter considers trusts law from a perspective which is rarely discussed in English and Welsh law schools: that of the international use of trusts. There is a very important dimension to trusts law practice: the use of trusts in jurisdictions known as ‘tax havens’ or ‘offshore jurisdictions’ to invest or shelter assets in a taxefficient way. Typically these offshore jurisdictions have low or effectively no taxes for foreign investors. Commonly they have specific statutory schemes in place for such overseas investors so that their trusts are treated differently from ordinary trusts: we shall consider the scheme used in the Cayman Islands by way of example. The users of these trusts structures are the international financial services providers (whether investment banks, international accountancy firms or others) who sell their tax-efficient vehicles and structures to clients from the UK, the USA and similar jurisdictions in the industrialised world. Importantly, not only do these offshore jurisdictions offer low taxes, but they also have historically refused to provide information to the tax authorities of other jurisdictions about the investments which have been made in their territories. Consequently, in the past, investors could acquire low tax, clandestine investment services.
Alastair Hudson

6. Trusteeship

Abstract
The role of the trustee is central to an express trust. While trusts law generally considers that ultimate ownership rests with the beneficiaries, all of the hard work in the management of the trust is carried out by the trustees. This chapter examines some of the key debates in the legal treatment of trustees and their duties. There are three key issues identified here. First, whether or not there is an ‘irreducible core’ content to trusteeship, as has been suggested, and whether the law on excluding trustees’ liabilities undermines the very concept of there being such an irreducible core. Indeed, the remaining debates in relation to the concept of trustees that are considered in this chapter all seem to call into question whether there is such a core content. The second issue asks whether or not there is really such a thing as one single kind of trustee, especially given the number of types of trustee which are subject to statutory regulation of different kinds. The third debate considers the investment of trusts, and asks how the Trustee Act 2000 has impacted on the standards imposed on trustees but not on very important types of trusts like pension funds and unit trusts.
Alastair Hudson

7. Resulting Trusts

Abstract
The resulting trust is one of the more enigmatic equitable doctrines: not least because every commentator has a (different) view on how it should operate and be understood. The most recent, leading judicial statement of the manner in which resulting trusts operate was that of Lord Browne-Wilkinson in Westdeutsche Landesbank v Islington, as considered below. Unfortunately, it opened as many debates as it resolved. Significantly, it rejected the principal argument posited by Peter Birks in property law, to the effect that unjust enrichments should be addressed by a greatly enlarged ‘restitutionary resulting trust’. Lord Browne-Wilkinson confirmed that the ambit of the resulting trusts doctrine was limited to only two categories, but in so doing he disturbed some earlier understandings of this doctrine. Therefore, this chapter considers, first, the nature of the resulting trust after the decision of the House of Lords in Westdeutsche Landesbank v Islington; secondly, whether resulting trusts operate automatically; thirdly, how resulting trusts operate in relation to illegal activities; and, fourthly, whether the Quistclose trust can be understood as a type of resulting trust.
Alastair Hudson

8. Constructive Trusts

Abstract
The constructive trust is central to equity’s mission to deal with unconscionable behaviour, to prevent formal legal rules from permitting an unjust outcome, and to prevent clever tricks and devices from allowing claimants to be treated unconscionably. There will always be situations in which some judges will wish to set a formal rule of law aside because its outcome on the facts of that case would be unpalatable. There are other judges who will shrug their shoulders and wonder at the injustice of the rule they are obliged to follow. The constructive trust is both a countervailing rule for judges of this second type, and a helpmeet for judges of the former type.
Alastair Hudson

9. Trusts of Homes

Abstract
The law relating to the ownership of the home, and the debates that surround it, are among the most intellectually rewarding in equity and trusts. They enable you to go to the heart of debates about British society, debates about the central organising principles of equity and trusts, and debates about the nature of law itself in its social context. The issues considered in this chapter relate to the ownership of the home in every situation except for the allocation of rights in the home after divorce. Whereas many of the issues relating to express trusts can appear to be technical and abstract, the issues relating to ownership of the home are easy to understand and vital (even if some of the legal models used to address them are not).
Alastair Hudson

10. Breach of Trust and Strangers

Abstract
This chapter considers the debates about the liability of strangers in connection with breaches of trust. The primary liability for a breach of trust rests with the trustees, i.e. when there is a breach of trust, the beneficiaries are required to sue the trustees first. The liability of the trustees is considered below. There is then a secondary liability for so-called ‘strangers’ who are not express trustees but who are nevertheless taken to be responsible for that breach of trust, either because they assisted that breach or because they received property as a result of the breach of trust. In either case, liability typically turns on whether or not the defendant can be shown, respectively, to have been dishonest or to have acted unconscionably with knowledge of the breach. In either case, the stranger will be liable for the entirety of the defendants’ loss. Given that many trusts involve enormous sums of money — such as pension funds — the liabilities which may be faced by the strangers are potentially enormous too. Consequently, the scope of these liabilities is much contested. That is the subject of this chapter.
Alastair Hudson

11. Tracing

Abstract
The law on tracing is problematic from its very core. Using tracing, property rights in one item of property may be transferred into different items of property, and even translated into entirely different sorts of proprietary and non-proprietary rights in the form of charges, liens and constructive trusts by way of remedy. Consequently, the claimant can acquire ownership rights against items of property in which the claimant had never previously had any rights. Clearly this form of action achieves justice for claimants who have had property taken from them by fraudsters and other wrongdoers; it also provides a different quality of justice for those who have had property taken from them without their consent in other ways.
Alastair Hudson

Overarching Themes in Equity and Trusts

Frontmatter

12. Women and the Law of Trusts

Abstract
Equity has always had a complex relationship with women and with ‘the feminine’. In its earliest incarnations, the role of trusts law was conceived of as being a means of protecting women from the social mores of the time. Briefly put, a settlor could settle property on trust in a way that would protect the rights of the woman to use the trust property, whereas if the property had belonged entirely to the woman then it would have passed to her husband when she married. The trust offered protection for the woman. However, other commentators have questioned whether or not equity really did serve women so well, as is discussed below.
Alastair Hudson

13. Injunctions

Abstract
This chapter considers injunctions. Injunctions are often not studied on undergraduate equity and trusts law courses, which is a shame precisely because the law on injunctions tells us so much about equity. The study of injunctions illustrates commonality of principle between different areas of equity like trusts implied by law, proprietary estoppel and the law on injunctions itself.
Alastair Hudson

14. Conclusion

Abstract
A successful legal system involves a synthesis of different types of legal thinking. More to the point, the register in which questions are asked will often dominate the answers which are generated. Thus, if a question is asked on the basis of economic efficiency, then the likely answer is that economic efficiency is the answer which maximises profits for businesses and involves the unthinking application of legal rules. If the questions are asked on the basis of morality, then equity is likely to have something to contribute.
Alastair Hudson
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