INTRODUCTION TO EQUITY
Development of equality Petitions
The people who were dissatisfied with the common law started to make a petition to the King, referred to as the "fountain of justice." The Chancellor initially handled petitions and later established the Chancery Court.
Early Chancellors were clergy, and so decisions were made by good conscience.' This led to unpredictability as well as inconsistency. The criticism was that equity varied according to how long the Lord Chancellor's feet. Equity System
From the 16th and 17th centuries to the present, the chancery was able to decide cases based on precedent. Thus, equity evolved into a system based on rules rather than individuals' conscience. Equity was not an all-encompassing legal system. It complemented the common law, filling the gaps, a gloss on what was already common law. Development of Equity
1. New Procedures; e.g., subpoena 2. New Remedies: e.g., i. Injunction ii. New performance iii. Rescission iv. Rectification 3. New Right: e.g. i. Equality of redemption ii. Rights under trust
The recognition of trusts in the history
If S transferred the land to T to use to benefit B, the common law would treat T as the proprietor and B as not entitled to any rights.
T's equity recognized B's rights and would force T to keep the land in the interest of B.
Then it was T who owned the title B was the equity owner. B was an equity owner.
T was the legal owner, while B was an equitable (or valuable) ownership. Connection to the common law In 1615, when the Earl of Oxford's Case was determined, there was much disagreement regarding the systems. James, I ruled that Equity should be the superior law over that of the common law in instances of conflict. This was a part of the Judicature Acts of 1873 -75 that established a modern structure for courts and allowed courts to use equitable and common law rules. The idea that equity rules are the norm is referenced as a matter of s49(1) Supreme Court Act 1981. Indeed, the tension between Equity and common law is beautifully depicted through Charles Dickens in Bleak House: "Equity sends questions to Law, Law sends questions back to Equity; Law finds it isn't able to do that, Equity finds it can't do it; nor can it even say that it's in no position to do anything without this solicitor's instruction and this counsel appearing. ...". In trusts and land law, the difference between common law (or legal) rights and equitable (or beneficial) rights is still significant. Maxims of equity
In the course of its evolution, various principles of equity were formulated. They aren't complex and swift rules of law but statements of general principles applicable in any given situation, without a contrary authority. It is important to note that several of the maxims overlap with others, and some even contradict each other. The 12 first maxims are usually regarded.
However, as maxims of equity, the numbers 13 to 17 might likewise be regarded as such. The adages are:
1. Equity is not the victim of an injustice that is not able to seek recourse. 2. Equity is in accordance with the laws. 3. If the equity is equal, the law will be the supreme law. 4. If the equity is equal, then the one with the most time is the winner. 5. Anyone who is interested in equity should be able to accomplish it. 6. Anyone who seeks equity should do it in the best of hands. 7. Delay defeats equity. 8. Equality is an as good thing as equity. 9. Equity refers to the goal, not the design. 10. Equity evaluates what's been accomplished and what is anticipated to finish. 11. Equity is the intention to fulfil the obligation. 12. Equity work in personam 13. Equity is not a way to help volunteers. 14. Equity cannot make perfect the imperfection of a gift. 15. Equity does not interpret the validity of a power arising from an unsound trust. 16. Equity will not allow the use of a statute to serve a fraudulent purpose. 17. Equity can't let the trust dissolve due to the absence of trustees.
What Does Trust Mean?
The basic idea of trust
In this way, it is a method to split the ownership of a property. With a trust, the property's obligations are separated from the rights and benefits of using the property. The person responsible for the responsibility and obligations regarding the property is called the trustee. The trustee is thought to be the official title over the asset. The person who can profit and use the property is referred to as "the beneficiary," They are believed to hold the "beneficent interest" in the property. For the benefit of the beneficiaries, equity acts on the trustee's conscience and imposes an obligation on him to fulfil the trust's terms. This obligation can be enforced in court by the beneficiaries. The Recognition of Trusts Act 1987 defines trusts with the given features:
1) The trust's assets are an independent fund and are not the trustee's property. 2) The trustee holds the trust assets. 3) The trustee is empowered and obligated to manage the trust's assets, invest in them, or transfer trust funds in conformity with the terms of the trust. The person who sets up a trust by transferring property to the trustee so that it can be placed by a trust to benefit the beneficiaries is referred to by the name of the settlor. Trust Property
Trust may be linked to any property. The term "property" can be considered to mean land; however, it is just one of the forms of property. Many kinds of property are separated into various categories. The major categories are:
Personal and real estate.
Pure personality and land.
Chattels can be real as well as private.
Intangible and tangible property.
The illustration appears included in the chart displayed in the paper. The illustration is further explained in the next part of the diagram.
The term is used to describe freehold land. The term comes in "action in rem" or "real" action that was an act to purchase the land.
This term encompasses all property other than freehold land. It is worth noting that due to historical considerations, the leasehold property is considered to be technically personal property. At first, there were only personal remedies accessible to leaseholders and not the right of freeholders to get the land back in actual action. However, in the end, legal actions were for leaseholders. However, leases were considered personal, which means that a gift in a will of "my personalty" includes any leases held through the testator's will.
Leases are also an example of a hybrid. They are referred to as "chattels real."
This includes leaseholds as well as freeholds. When speaking of land, the term "land" is the correct word instead of the word 'property'. Certain rules are specific to land that does have an application to the other types of belongings.
1. Pure personality--chattel personal
This means that all personal property that is not leasehold is divided into choses (things) in possession and choses (things) in motion.
2. Possessions-tangible personal property
These can include furniture, vehicles, paintings, books, jewellery, and even animals. Because physical assets are "tangible," you can get rights by having them in your hands instead of the second class.
3. Actions of the Choses Personal property that is intangible
This category comprises shares, cheques, insurance policies, debts, and intellectual property documents. While there may be an official document to prove ownership (such as a share certificate or saver's account passbook), the assets themselves are not tangible, making it impossible to claim their rights through physical possession. Rights, however, are enforceable by legal action. Thus, the choice to act is a right that can be enforced by legal action before the courts.
4. Tangible and intangible rights over the land
They are more pertinent to your course on land law, but are listed in this article for the fullness. Note that land includes "corporeal hereditaments"—tangible property, including the land itself and things growing on it, built on it, or attached to it that become part of the land. The land also contains "incorporeal hereditaments," which are rights to land that aren't visible or affected. They include easements, mortgages, and gains. For more details, you can read about land law.
Trusts in relation to other ideas
A contract is typically the result of two or more parties; however, trusts are often an outcome of the settlor's decision to make a unilateral one. A trust can be established without the beneficiary's knowledge or consent. It can also happen without the settlor's or trustee's knowledge or approval.
Whether or not they are parties to the trust agreement, beneficiaries always have enforceable rights against the trustee under trust law. In contract law, enforceable legal rights are solely conferred on the contracting parties unless the claimant falls within the restrictions outlined in the Contracts (Rights of Third Parties) Act 1999.
Another distinction is that rights under contracts are entirely personal. The sole remedy in the case of a breach would be the payment of damages against the person who committed the violation. The trustee is responsible personally for paying back the trust in the case of a breach of his obligation. The beneficiaries, however, own the property that is subject to the trust. Suppose trust property misused by the trustee is found to be in the hands of a different individual. In that case, the beneficiaries could recover the trust property they have received from the other party.
Administration of estates
All the deceased's assets will be transferred to the personal representatives on the day of his death. In the legal rules of intestacy, they are responsible for overseeing the deceased's estate in conformity with the deceased's will or, if there's no will (which is known as dying "intestate").
The beneficiaries of the deceased's estate by will or intestacy can also be considered beneficiaries. But, unlike the beneficiaries of trusts, who have legal rights from the time the trust is set up in an estate plan, the beneficiaries of an estate do not have the right to the estate of the deceased if the estate is being managed.
The title is transferred to beneficiaries in a will only when the administration has been completed. The distribution of the estate through the personal representatives can only be completed when every asset has been redeemed, and All obligations have been paid. If the administration fails, the only legal rights are to ensure that the estate is appropriately managed, i.e., under the provisions in the will.
While it typically takes some time to manage an estate (sometimes more so for larger estates), personal representatives must manage the estate and then transfer it in the shortest time possible. The trustees' responsibilities to monitor the trust might last for a significant amount of time, making them potentially liable to an extended duty.
Trusts are currently used
Trusts is an adaptable and flexible concept
While the principles of equity and the trust law evolved to resolve family disputes, the trust has proved to be an extremely flexible and adaptable concept to solve various legal issues in the business world. Therefore, trust law is highly relevant to numerous areas of the modern practice of law.
Occupational pension schemes established by employers for the benefit of their employees will inevitably be set up under trust. The company will generally fund the scheme through monthly contributions, paid to the scheme trustees, which go towards a ‘pot’ of money for each employee. Each employee’s ‘pot’ funds lump sum and pension benefits on retirement.
Establishing a pension scheme under an irrevocable trust has significant tax advantages. Employer and employee contributions are tax-deductible, and the pension fund itself pays no income tax or capital gains tax on investment returns generated by the scheme assets.
Another reason for using a trust structure is to keep the scheme funds separate from the company’s assets. This provides security for scheme members’ benefits and reduces the risk of the company misapplying scheme assets for its purposes. A prime example of this involved Robert Maxwell’s activities in the 1990s, where some £420 million went missing from the Mirror Group Pension Scheme.
The concept of trust has also piqued the interest of the modern investor. A unit of trust is a good example. A fund manager manages and invests on behalf of investors by purchasing a specified number of units or "shares" in a fund. That fund will be invested in many different companies most of the time. This spreads out the risks of stock market speculation much more than if each investment were made separately. Investors receive income on their units, and they can sell or buy more units. The value of the units will fluctuate in line with the underlying investment fund. These trusts are an excellent way to invest in the stock markets of the UK and other countries.
Providing insolvency protection
In the event of a contract to provide products on credit terms or lend money to fulfil specific purposes, trusts are typically utilised for safeguarding against insolvency. When you add trust to a contract or loan, the person who benefits from the trust is usually able to put other creditors ahead of them if the other party goes bankrupt.
When negotiating for the purchase of items, the seller could employ a trust to keep an equitable interest in the items until full payment has been received. The buyer can also retain an equitable share of the purchase funds, subject to the item's delivery dispute.
The situation can be compared to a loan made for a particular item. The lender creates an obligation on the amount he has borrowed to retain an equitable ownership interest in the loaned amount until the money is utilised for the specified reason. If the borrower doesn't pay back the loan before using the money and the lender can't get the money back, the lender may take back the loaned amount and pay other creditors before the borrower.
Since January 1, 1997, every trust in which the trust property is land or an interest in it is a "trust of land". Trustees who have legal title to the land for the benefit of their beneficiaries (who typically are the same people) can hold the land as well as have the ability to sell the land. Trust agreements, therefore, provide the foundation for the vast majority of transactions that involve land.
Clubs Associations that are not incorporated
Suppose clubs or societies are not incorporated (i.e., as limited companies). In that case, they do not have a distinct legal entity and cannot have a "club"-owned property that the organisation itself owns. This is why it is typical for the property of the club to be held by trustees in the interest of members of the club, with such property held in accordance with the rules of the club or its constitution.
One of the initial uses of trusts was to permit the property to be donated to a charity specified in the giver's will. Trusts for charitable purposes are enforced for the benefit of the general population by the attorney general. They also receive several tax exemptions.
Delivering for the family
It's not always practical or acceptable for a minor to own property. The trust mechanism allows minors to gain from the trust assets, for instance, an investment fund, while a trustee takes on the responsibility of the legal obligations and obligations that come with it. This makes trusts a great way to help people who cannot help themselves or protect assets from too many family members.
Family trusts can also be employed to create long-term arrangements for the family of the settlor. For instance, they can be used to provide for the family by giving the settler spouse an annual income from their property for the rest of their lives (called "life interest") and the property's remaining interest passing to the children at the death of the spouse. They can also accommodate the changing needs of beneficiaries in future circumstances, something an unrestricted gift can't. The settlor's person could wish to have his family's finances supervised by a trustee chosen by the settlor and may also use trusts to manage the wealth of the family or to keep heirlooms in the family.
From the settlor's point of view, one of the most important benefits is that trust mechanisms let the settlor decide when and how the beneficiaries can get the benefits of the asset. This is something that an outright gift can't do.
Trusts and taxation
The most common reason for having trusts that are trusted, specifically family trusts, is to minimise the impact of taxation. Tax law is constantly changing, and the numerous applications of trusts for tax planning go far beyond the scope of an equity or trust course. The following is only intended as a basic illustration of the critical principles.
For high-earners, putting property into a trust can result in a lower rate of income tax being applied to investment returns than would otherwise be the case if the income was paid directly to the settlor on a personal basis.
The rate of capital gains tax, a tax payable on the disposal of capital assets, can also be more favourable within certain types of the trust arrangement. This is especially true of discretionary trusts, in which the trustees choose one or more beneficiaries from a set group (such as the settlor's family) to get the trust property.
Trusts may also have advantages with inheritance tax, a tax charged on property transferred due to the owner's death. Special inheritance tax rules apply to trusts, and these vary depending on the exact nature of the trust in question. These rules are complex and offer several tax planning options. This is often because trust property is held separately from the deceased's assets. So, the capital in the trust might not be counted as part of the estate of the person who died for inheritance tax purposes.
The Terminology used in trust law is much to blame for the perception that it is complicated. The following are some of the phrases that are used most frequently:
1. A trust is an equitable relationship that comes into being when a settlor forms a trust by transmitting properties to a trustee to hold those assets in trust for a group of individuals known as beneficiaries or for a charity cause.
2. A person who has a beneficial or equitable share in a trust is a beneficiary, which is also another name for a cestui que trust.
3. The person responsible for establishing the trust is referred to as the Settlor.
4. A person who accepts settled property to administer that property on behalf of the beneficiaries is a trustee.
5. Real estate is land that is owned free and clear.
6. Real estate that is not held in freehold is personalty.
7. An act of generosity might be defined as the accidental transfer of property.
8. Inheritance of personal property specified in a will is called a bequest.
9. a legacy is comparable to a bequest in this regard;
10. an offer of freehold property that is incorporated in the will of a person is referred to as a device;
11. A will is an official document that defines how a deceased person's estate will be divided following the death of the person;
12. Personal representatives (also known as "PRs") are the persons who are responsible for managing a deceased person's assets after their death.
13. A person who has been designated in a will as the executor (or female executrix) is referred to as an executor.
14. A personal representative, also known as an administrator or female administrator, is appointed when a person passes away without leaving a will (also known as dying "intestate") or when a person's will fails to successfully select executors.
15. A testator (female testatrix) is someone who makes a will.
16. An intestacy happens if the deceased individual dies without a will;
17. A testamentary gift is a gift from a will.
18. A gift inter vivos is an enticing present;
19. According to section 1 of the Law of Property (Miscellaneous Provisions) Act 1989, a deed is a legal instrument that has been affixed with a seal, signed in the presence of witnesses, and then delivered to the recipient.