English trust law comprises the statutory and case law that govern the formation and operation of trusts, and the associated remedies for breach or failure of trust, in England and Wales. In English law, a trust is a legal relationship that involves one or more trustees holding an asset for a set of beneficiaries.
Trusts were a creation of the courts of equity in Medieval and early modern England, originating in the law of property and obligations. Historically, trusts were primarily used where people left money in a will, or created family settlements, charities, or some types of business venture. Today, trusts also play an important role in financial investment, especially in unit trusts and in pension trusts.
Express trusts are created by a settlor, who transfers assets to one or more trustees (which may include themselves), who undertake to use the assets for the benefit of beneficiaries. Subject to certain exceptions (e.g. charitable trusts and some non-charitable purpose trusts), English law requires a trust to have ascertainable beneficiaries. Beyond these expressly created trusts, English law recognises resulting and constructive trusts, which are imposed by the operation of law.
If trustees breach their duties, beneficiaries may seek restoration of trust property or compensation for loss caused by the breach. They may also follow trust property or trace its proceeds and, where the requirements of the relevant claim are met, recover property or pursue personal claims against third parties.
Legislation that regulates English trust law include Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and Charities Act 2011.
History
Statements of equitable principle stretch back to the Ancient Greeks in the work of Aristotle,Aristotle, Nicomachean Ethics (350 BC) Book V, pt 10 while examples of rules analogous to trusts were found in the Roman law testamentary institution of the fideicommissum.Reinhard Zimmermann, The Law of Obligations – Roman Foundations of the Civilian Tradition, Oxford University Press, 1996, ISBN 0-19-876426-X However, English trusts law is a largely indigenous development that began in the Middle Ages, from the time of the 11th and 12th century crusades.See generally, JE Martin, Hanbury & Martin: Modern Equity (19th edn Sweet & Maxwell 2012) ch 1, 5–18
The "common law" of all England traces its origin to the Norman Conquest of 1066. During the crusades, landowners who went to fight would transfer title to their land to a person they trusted so that feudal services could be performed and received, but many who returned found that the people they entrusted refused to transfer their title deed back.Martin (2012) 9 Sometimes, common law courts would not acknowledge that anybody had rights in the property except the holder of the legal title deeds. So claimants petitioned the King to sidestep the common law courts. The King delegated hearing of petitions to his Lord Chancellor, who established the Court of Chancery as more cases were heard. Where it appeared "inequitable" to let someone with legal title hold onto land, the Lord Chancellor could declare that the real owner in equity was another person.Martin (2012) 6–8
Uses (before c. 1535) The Court of Chancery determined that the true "use" or "benefit" of property did not belong to the person on the title (or the feoffee who held seisin). The cestui que use, the owner in equity, could be a different person. So English law recognised a split between legal and equitable owner, between someone who controlled title and another for whose benefit the land would be used. It was the beginning of trust law. The same logic was useful for Franciscan friars, who would transfer title of land to others as they were precluded from holding property by their vows of poverty.FW Maitland, Equity (1916) 25. WS Holdsworth, A History of English Law (1923) vol 4, 415
During the 15th century and 16th century, "uses" or "trusts" were also employed to avoid the payment of feudal taxation. If a person died, the law stated a landlord was entitled to money before the land passed to an heir, and the landlord got all of the property under the doctrine of escheat if there were no heirs. Transferring title to a group of people for common use could ensure this never happened, because if one person died he could be replaced, and it was unlikely for all to die at the same time.Martin (2012) 10
Statute of Uses (c. 1535) King Henry VIII saw that this deprived the Crown of revenue, and so in the Statute of Uses 1535 he attempted to prohibit uses, stipulating all land belonged in fact to the cestui que use.Martin (2012) 11 Henry VIII also increased the role of the Court of Star Chamber, a court with criminal jurisdiction that invented new rules as it thought fit, and often this was employed against political dissidents. However, when Henry VIII was gone, the Court of Chancery held that the Statute of Uses 1535 had no application where land was leased.Martin (2012) 12 People started entrusting property again for family legacies.FW Maitland, Equity (1916) Lecture 1
Trusts grew more popular, and were tolerated by the Crown, as new sources of revenue from the mercantile exploits in the New World decreased the Crown's reliance on feudal dues. By the early 18th century, the use had formalised into a trust:e.g. Hopkins v Hopkins (1739) 1 Atk 581, 591 per Lord Hardwicke where land was settled to be held by a trustee, for the benefit of another, the Courts of Chancery recognised the beneficiary as the true owner in equity.Martin (2012) 13
Merger of law and equity (c. late 1800s) Parliament merged the common law and equity courts into one system with the Supreme Court of Judicature Act 1873. Equitable principles would prevail over common law rules in case of conflict.Supreme Court of Judicature Act 1873 s 25(11), 'Generally in all matters not herein-before particularly mentioned, in which there is any conflict or variance between the Rules of Equity and the Rules of the Common Law with reference to the same matter, the Rules of Equity shall prevail.' Now found in the Senior Courts Act 1981 s 49 The trust largely continued as before. In other parts of the Commonwealth (or the British Empire at the time) trust law principles, as then understood, were codified for the purpose of easy administration.Indian Trusts Act 1882
Concept and theory Hanbury and Martin define the trust as:Hanbury & Martin: Modern Equity (23rd edn Sweet & Maxwell 2024) ch 2[A] relationship recognised by equity which arises where property is vested in a person or persons called the trustees, which those trustees are obliged to hold for the benefit of other persons called the beneficiaries.Other doctrinal characteristics of trust law include the trust instrument; that the subject matter of the trust is property; and that equitable interests to trust property are not binding on bona fide purchasers ("equity's darling"). Trusts also involve a fiduciary relationship between the trustee and beneficiary, with the trustee having a legal interest in the property and the owner having an equitable one. As equitable remedies, trusts can also be imposed where a court finds it equitable to do so, or they may be imposed by the operation of law. Trusts can also be distinguished from bailments, agents, contracts, debts, charges, wills, and choses.
English law generally recognises two broad categories of trusts: private trusts and public (charitable) trusts. Three kinds of private trusts are also generally recognised by the courts: express trusts, constructive trusts, and resulting trusts. Sub-types of express trusts include discretionary trusts, testamentary trusts, inter vivos trusts, and employee trusts. Constructive and resulting trusts are sometimes called implied trusts (as opposed to express trusts), but the use of the term is controversial. Mutual wills, bare trusts, quistclose trusts, secret trusts, and some forms of purpose trusts have also been recognised as types of trusts.
Fusion debate Because trust law derived from the Lord Chancellor and courts of equity, there has been debate over the extent to which that common law and equity have and should be fused. Before the Supreme Court of Judicature Act 1873 and 1875, Edward Coke and William Blackstone had disapproved the notion that equitable jurisdiction was in some way distinct from the law.See Earl of Oxford's case (1615) 21 ER 485 Per the Acts, where there was a conflict, the precedents of the courts of equity would prevail. But there remained disagreement about whether this was meant to achieve fusion in substance or merely in procedure.See generally, Harris v Digital Pulse Pty Ltd (2003) 197 ALR 626.
In Australia, equity represents a distinctive set of principles and its own logic, as manifested in the institutions it created, such as the trust.See R Meagher, W Gummow and J Lehane, Equity: Doctrines and Remedies (3rd ed.) 45. JD Heydon, W Gummow and R Austin, Cases and Materials on Equity and Trusts (4th ed) 13. See also J Martin, 'Fusion, fallacy and confusion; a comparative study' Conveyancer and Property Lawyer 13 In England, Andrew Burrows has argued that, when the situations are functionally identical, the courts should treat like cases alike in both common law and equity, such that the rules in equity and common law ought not to conflict.A Burrows, 'We do this at common law but that in equity' (2002) 22 OJLS 1
In practice, the debate about the fusion of law and equity has waned in importance in debates about private law and the law of trusts.See Sir Rupert Cross, Statutory Interpretation (1975), A Burrows, 'The relationship between common law and statute in the law of obligations' (2012) 128 LQR 232. In the case law see Johnson v Unisys Ltd UKHL 13 and Gisda Cyf v Barratt UKSC 41
Categorisation in private law There has been debate about the appropriate taxonomy that underlies the law of trusts. When English law was being codified and exported through the British Empire, for example in the Indian Trusts Act 1882, the authors thought it was thought appropriate to describe a trust as "an obligation annexed to the ownership of property", implying a view often restated, that "equity acts in personam". On the other hand, it has been consistently held that the beneficiary of a trust holds a proprietary right. This enables the beneficiary to claim priority over some (but not all) non-proprietary creditors in insolvency, or the beneficiary to bring a direct action in tort against a defendant who has damaged trust property. It is also acknowledged that the beneficiary may trace money that has wrongly been dissipated from the trust, but unlike a legal property owner, perhaps not against a bona fide purchaser. Peter Birks, on this ground, has suggested that beneficial interests trusts are a slightly weaker form of proprietary right.