Equity and Trusts – Introduction & Historical Origins (1)

Equity and Trusts – Introduction & Historical

Origins (1)

Introduction

What is distinctive about trusts law that makes study of its history more than usually valuable?

Introduction

• aim here is to provide a sense of the history rather than overview of it

• to suggest ways that equity and trusts can be appreciated as part of the history of ideas

Introduction

We are not considering the whole history only parts of it – aim is to give a sense of why thinking about the history of the subject is important and illuminating

Consider

What is distinctive about trusts law that makes study of its history more than usually valuable?

One answer

Equity and trusts is pre-eminently to do with wealth – thus we might ask what wealth is and what are the social relationships that wealth entails - relationships of power and influence for example.

Click on link: Mr and Mrs Andrews

Mr and Mrs Andrews

The portrait was painted around 1750 soon after the marriage of Robert Andrews of the Auberies and Frances Carter of Ballingdon House, near Sudbury

Mr and Mrs Andrews

The painting encapsulates a number of themes in the law of trusts – themes that will help us to situate trusts in a social context

Mr and Mrs Andrews

What can we tell from the painting?

Let’s suppose that the land Mr Andrews owned was subject to what was called a strict settlement

Strict settlement

• Strict settlements allowed land to remain in one family by descending through the eldest male line (‘primogeniture’).  

• Each time the eldest son inherited his interest was reduced to a life interest and the land was carried over for the next generation when the process would then be repeated

Strict settlements

This allowed wealth to be held by families such as the Andrews in the same land in the same houses for many centuries

Benefits

Settled land benefits: First: intergenerational planning (really better thought of as the control of their land). Secondly: tax avoidance on transfers made at death. Also - provision made for family dependants could be assured without breaking up the estate (provision for income, fixed term benefits or residency etc)

Law as a cultural artifact

Law can be seen as a cultural product not merely made up of rules but also of ideas –an aspect of what is called the history of ideas.

Trusts Literature

Trusts are the subject of a considerable literature - discussion of rules and ideas has taken place not only in legal literature but in imaginative literature

Such texts will help you to understand the origins, development and possible future forms of the subject

Sense and Sensibility

See extract from Sense and Sensibility (1811) the novel by Jane Austen

Sense and Sensibility

Consider what the book tells you: – for example – about the socio-economic place of women in this society, why they were not provided for within the settlement, the impact of the settlement on the estate, and broader questions such as whether one generation should be able to impose its wishes through many generations?

A note of caution

Beware the character of trusts - the study of trusts should really be some other institutional setting than the family

Although the trust did not become the central device in the development of the market economy it has played and still plays a fundamentally important role

The practical value of history

A historical sense will help discourage an unhelpful approach to study – that of reading cases as if they are “out of time”

The practical value of history

It will help you to situate key cases in policy terms with changes in other areas of law – despite appearances law is interconnected

Making connections by recognising dates and names is also helpful in remembering and making sense of what is going on in law generally

History undervalued

Highly structured treatments can mask that the law as we have it now is made up of an uneven historical accretion

Statute and case law

Numbers and types of cases can create a misleading impression

Litigation and social factors

Litigation is limited by social and economic restraints - the will and the means to go to court also by problems of locus standi.

Patterns of litigation

Note: some questions that are important remain unclear other questions that are less important have been heavily litigated.

Thus - thinking about trusts without some sense of its history and of social factors can lead to a distorted view

Historicism

“The belief that an adequate understanding of the nature of any phenomenon and an adequate assessment of its value are to be gained through considering it in terms of the place which it occupied and the role that it played within a process of development.”

What does this mean?

Much law has been explained as if it has followed a path of development or change in a simple linear fashion - constantly moving forwards towards some ultimate objective and that the stages of its development have each brought it closer to that objective

Historicism

A problem - because the history of law - as with any history – is demonstrably nothing like this

Evolution

Law shares evolutionary characteristics with nature:

historical periods of equilibrium with little change punctuated by spasms and jumps that led to wider change and also “random mutations”

A “legal environment”

Law can be seen occupy a legal “environment” – e.g. other jurisdictions can be a stimulus to such change

An example in trusts law is/was the debate over the “remedial trust”

A “legal environment”

Look for examples to cases like Barlow Clowes International v Vaughan and the approach of the judges in that case to the issue of tracing among innocents

Some basics

The basic model

First trusts resulted from Crusades.

Crusaders transferred property to someone they trusted to be managed for the benefit of their families.

Aim was to protect property from the rules of succession on death and from taxation.

But a problem …

At common law the property had been transferred and all rights now resided with another.

If the crusader died his family had no legal right to the property – there was no contractual arrangement between them and the friend holding the property

But a problem …

With no remedy at common law to recover property given to a trusted friend for safe keeping, how as the problem resolved?

Common law

Added to this - the common law writ system was chiefly only able to offer the remedy of damages and became restrictive and directs petitions to the King unworkable – the Chancellor took over this work

A solution

By 13th C the chancellor was offering remedies to the type of situation depicted above by enforcing obligations undertaken by – for example – the trusted family friend

A solution

The friend (the trustee) was deemed to have an obligation to the family (the beneficiaries) who now had personal rights (personal because they were held against the trustee) that could be enforced according to the terms of the agreement reached between the dead man (the settlor) and the trustee

Character of the trust emerges

From the very beginning the history of the trusts is about protection

protection against family members

protection against outsiders to the family protection against the state in the form of taxation

protection against creditors

The basic model

A settlor creates a trust then appoints trustees to administer the trust on the terms which the settlor has determined on behalf of the beneficiaries

Note though – variations to this basic scheme although three entities in law: settlor /trustee/ beneficiary – the beneficiaries can include the trustee(s) and the settlor for example

Maitland - Equity

“Of all the exploits of equity the largest and most important is the invention and development of the trust it is an institute of great elasticity and generality as elastic, as general as contract. This is perhaps the most distinctive achievement of English lawyers it seems to us almost essential to civilisation and yet there is nothing like it in foreign law.”