What is Equity?

Equity can mean two things: equity in the general sense of fairness and justice, and
equity in the specific sense of rules and principles applied by the Court of Chancery
(H&M at [1-004]).

Different meanings of equity

According to Hayton & Mitchell at 1-002, “it refers not to a general concept of fairness or
justice but rather, specifically, to the body of rules and principles, forming part of the
current law, which have evolved from rules and principles applied and administered by the
Court of Chancery. [Maitland’s definition]

Equity did not consist of rules and principles, but rather depended on the particular
Chancellor’s views of the merits of a particular case and thus varied according to the size of
the Chancellor’s foot.

Equity is only a gloss on, or supplement to, the common law. It has never shared common
law’s aim of being a self-sufficient system that deals with all possible claims that might be
made by a party.

Equity

Introduction- The Nature of Equity

Equity serves to mitigate the rigors of common law by preventing any benefit accruing to a
defendant as a result of unconscionable conduct or to compensate any loss suffered by a
claimant which resulted from some unconscionable conduct. RL doesn’t agree with this

Equity
1. Ensures that strict application of common/stat law does not result in any unfairness
when applied in a specific case.
 Equity is a form of natural justice
2. Collection of principles developed over centuries developed by the Courts of
Chancery, to judge peoples consciences.
3. Comprises the procedural rules and forms of action developed by the Courts of
Chancery

The main function of a Court of Equity is to determine whether or not the individual
defendant has acted in a good conscience.

Westdeutsche Landesbank v Inslington LBC

1. Set out Lord Browne-Wilkinson’s core principles of the law of trusts
2. Re-establishing traditional notions of equity as being at the heart of English trusts
law.
 a. Criticism in which the direction in which the substantive law has been
pointed
i. Should a single standard of “conscience” be created which will cater
for example, for both commercial cases involving cross-border
financial transactions and for family cases involving rights to the home

Common Law Equity

Example of Claims:
Breach of Contract Breach of Trust
Negligence Tracing Property
Fraud Claiming Property on insolvency
Examples of remedies and responses available:
Damages Compensation
Common Law Tracing Equitable Tracing
Money had received Specific Performance
Injunction
Rescission
Rectification
Imposition of constructive trust
Imposition of resulting trust
Subrogation
Account
Lien
Charge
Specific restitution

Courts of Equity will intervene to stop a fraudster, shyster or wrongdoer from taking
advantage of the rights or situation of another.

Shyster  those who deliberate commit fraud and those who are not acting entirely honest
without being fraudulent

Equity therefor intervenes to protect the victim’s underlying right because of

1. Contract with the shyster
2. Shyster has control over some which is rightfully the victim’s
3. Assume that the actions of the shyster will affect the victim in the future in some
way

Core Equitable Principles from Snell’s Equity

a) Equity will not suffer a wrong to be without a remedy.

b) Equity follows the law
c) Where there is equal equity, the law shall prevail
a. Eg where two people have both purported to purchase goods from a
fraudulent vendor of those goods for the same price, neither of them would
 have a better claim to the goods in equity. Therefore, the ordinary common
law rules of commercial law would be applied in this context.
d) Where the equities are equal, the first in time shall prevail
a. Time is important, in which this perhaps reflects equity’s commercial element
e) Delay defeats equities
a. If a claimant allows too much time to elapse between the facts giving rise to
the claim and the service of proceedings to protect that claim, the court will
not protect the claimant’s rights. This is known as laches (the doctrine of not
allowing an equitable remedy where there has been unconscionable delay).
f) He who seeks equity must do equity
g) He who comes to equity must come with clean hands.
h) Equality is equity
a. Where two people have equal claims to that property, equity will order an
equal division of title in that property between the claimants in furtherance
of an ancient principle that “equity did delight in equality”.
i) Equity looks to the intent rather than to the form
j) Equity looks on as done that which ought to have been done
a. Walsh v Lonsdale
i. Where a binding contract to grant a lease was deemed to create an
equitable lease, even though the formal requirements to create a
valid common law lease had not been observed.
k) Equity imputes an intention to fulfil an obligation.
l) Equity acts in personam

Five additional principles which cut to the heart of equity

a) Equity will not permit statute or common law to be used as an engine of fraud.
a. Example of secret trusts
b) Equity will not permit a person who is a trustee of property to take a benefit from
that property qua trustee
c) Equity will not assist a volunteer
a. In line with the commercial roots of many of these doctrines, equity will not
assist a person who has given no consideration for the benefits which she is
claiming.
d) Equity abhors a vacuum
a. A trustee must hold property on trust for identifiable beneficiaries. To do
otherwise would create a vacuum in the ownership of the property.

Equity in Singapore

Note that Singapore has been on quite an equity kick, in emphasising the origins of
equity. This is strange because Singapore has never had separate courts for the
administration of both equity and common law, and so there really shouldn’t have
been these anti-fusionist views at all.
Historically, this was because (as RL says) the UK couldn’t be bothered to send
down enough people to Singapore and so the people that actually were sent down
had to do everything themselves. Eg burger king, macs, kfc all in the same kitchen
The Second Charter of Justice stated that the Court of Judicature of Penang, Singapore, and
Malacca was “to have such jurisdiction and authority as our Court of King’s Bench and our Justices
 thereof, and also as our High Court of Chancery…”

(RL’s guess) Singapore likes to use Australian cases a lot, and the State of NSW
(one of the leading states in Australia) was really into the separateness of law and
equity, because the fusion happened much later in NSW (in the 1970s). So, this
separation was important for them because it had a lot of practical implications up
until the late 1900s (whereas the UK fused it in 1875). So, we have basically
borrowed a lot of things without even realising and understanding the important
historical influence that really isn’t applicable to ourselves.
s 3 of the Civil Law Act confirms that the administration of law and equity is fused in
Singapore.

Distinguishing Equity From the Common Law

1. Fairness and Justice

2. Unconscionability
3. Second- Order Charter

However, RL debunks 1 and 2 but is fairly open to 3. Sometimes equity is described as the
body of law based on fairness and justice. However, this is Equity with a small e. it was
historically true and explains the rules of some equitable rules that equity was based on
fairness and justice.

A trust operates on the conscience of the legal owner of property

1. Fairness and Justice

a. Often people describe Equity as being the body of law which is based on
fairness and justice (the lay sense of equity)

b. This is, generally speaking, inaccurate

(1) Equity abates the rigour of common law courts

1. But there are plenty of rules which could be regarded as

strict and rigid in the common law which equity does
nothing about. E.g strict liability in tort or for breach of
contract, the criminal law

(2) Courts of equity determine the answer depending on the

spirit of the underlying rule and according to the strictness of
the letter of the rule

1. So do common law courts, eg in interpreting statutes

(3) courts of equity not bound by rules or precedent but acts on

the opinion of individual Chancellor hearing the case

1. Sometimes said disparagingly that Equity depended on the

‘length of the Chancellor’s foot’
 2. This is no longer true, Chancellors increasingly developed
rules by the 16th century which allowed for systematization
of the rules

(4) Equity is more ‘fair’ and seeks to do ‘justice’

1. Rules of common law also seek to do justice. There are also

many instances of equitable rules which may be regarded as
unduly strict and onerous, eg remedies for breaches of
fiduciary duty

2. Unconscionability

a. Another feature often ascribed to Equity is ‘unconscionability’. This can

be seen by the definition in Westdeutsche Landesbank Girozentrale v
Islington LBC where Lord Browne-Wilkinson holds that

(1) ‘Equity operates on the conscience of the owner of the legal

interest. In the case of a trust, the conscience of the legal owner
requires him to carry out the purposes for which the property was
vested in him (express or implied trust) or which the law imposes
on him by reason of his unconscionable conduct (constructive
trust)

As opined by Birk (taxonomy), The lawyer who deals in 'unconscionable behaviour' is rather
like the ornithologist who is content with 'small brown bird'. 'Equitable fraud’ is just as bad.
There are hundreds of kinds of equitable fraud and there are hundreds of kinds of
unconscionable behaviour. Essentially Birk is saying that unconscionability is so wide, it
depends on peoples moral code. Not a helpful way to structure thinking.

3. Second Order Character

a. The common law can stand alone by itself without any rules from Equity.
It may be more unjust, but it could still perform its functions as a way to
guide conduct

b. Essentially, If you took away the equity stuff, would still have a
functioning common law body. But if you took away the common law
stuff, equity cannot stand by its own. Eg in torts, would only have
injunctions

Trust

Definition of a trust

1. ‘A trust is an equitable fiduciary obligation, binding a person (called a trustee) to

deal with property (called trust property) owned and controlled by him . . . for
the benefit of persons (called beneficiaries . . .) . . . any one of whom may enforce
the obligation.’:
 D. Hayton, P. Matthews, and C. Mitchell, Underhill and Hayton: Law Relating to
Trusts and Trustees, 19th ed (LexisNexis 2016), [1.1] (1).

2. Hague Convention on the Law Applicable to Trusts and on their Recognition

(1985) art.2

“For the purposes of this Convention, the term "trust" refers to the legal relationships
created - inter vivos or on death - by a person, the settlor, when assets have been placed
under the control of a trustee for the benefit of a beneficiary or for a specified purpose.

A trust has the following characteristics:

(a) The assets constitute a separate fund and are not a part of the trustee’s own
estate;

(b) Title to the trust assets stands in the name of the trustee or in the name of
another person on behalf of the trustee

(c) The trustee has the power and the duty, in respect of which he is accountable,
to manage, employ or dispose of the assets in accordance with the terms of the
trust and the special duties imposed upon him by law.

The Modern Express Trust

1-041 Hayton & Mitchell

The impossibility of producing a neat definition of a trust should not be seen as a weakness in
the trust concept, but rather as a product of its great practical utility and the diverse range of
its applications.

1-044 Hayton & Mitchell

Discretionary trust

“indeed, S may have no real intention to benefit the party fulfilling the role of beneficiary in
the modern trust: the red cross is our example”. Then what’s the point of the discretionary
trust or like saying that the red cross is the beneficiary?

The parties to a trust

The settlor 1-054 Hayton & Mitchell

1. Trust can arise without a settlor  operation of law

2. Express trust requires a settlor. When a settlor holds property she can create a trust in
one of two ways

a. Transfer to the trustee. S transfers the property to T subject to the terms of a

trust in favour of the beneficiary
 b. S becomes the trustee herself

3. Put very simply, an express trust is created when a person (the settlor) directs that
certain identified property (the trust property) will be held either by him or others (as
trustees) under a legal obligation which binds the trustees to deal with that property,
which is owned by them as a separate fund, for the benefit of another (the beneficiary)
[taken from Aikens LJ in Williams v Central Bank of Nigeria]

Why set up a trust ?

1. S wishes to dispose immediately of her initial rights in the trust property  so that the
property disposed of will not count towards the calculation of estate duties (such as
inheritance tax) on S’s death.

2. Place particular assets beyond the reach of her actual or potential creditor by
disposing of the rights in those assets.

Saunders v Vautier principle  allows all of the beneficiaries of a trust, acting together, to
call for the trust property to be transferred to them by the trustees, even if such a transfer is
inconsistent with the terms of the trust

Fusion
*Peter Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 University of
Western Australia LR 1, especially 1-25

1. Two categories of jurisdictional origin, namely equity and law.

a. In England, the courts of law and equity were institutionally separate until
the Judicature Acts of 1873-1875
2. Maitland described equity as “that body of rules administered by our English courts
of justice which, were it not for the operation of the Judicature Acts, would be
administered only by those courts which would be known as Courts of Equity”
3. Therefore, all rights are either legal or equitable and proprietary or personal

The trust

The trust allows more than one person to have rights in the property simultaneously by
permitting a division in the ownership of the trust property between a trustee and a
beneficiary such that the trustee is compelled to act in the interests of the beneficiary in
relation to the management of the property held on trust.

Thomas and Hudson’s The Law of Trusts defines a trust as “The essence of a trust is the
imposition of an equitable obligation on a person who is the legal owner of a property
(trustee) which requires that person to act in good conscience when dealing with that
property in favor of any person (the beneficiary) who has a beneficial interest recognized by
equity in the property. The trustee is said to ‘hold the property on trust’ for the beneficiary.
There are four significant elements to the trust:
1. That is equitable
2. That it provides the beneficiary with rights in the property
3. That it also imposes obligations on the trustee
4. Those obligations are fiduciary in nature

Beneficiary is said to have an equitable interest in the property whereas the trustee will be
the “legal owner” under common law.

The settlor
Creates the trust and was the absolute owner of the property prior to the creation of the
trust.

Types of trust
1. Express Trust (created deliberately be a settlor)
2. Implied Trust
3. Automatic resulting Trust (implied by a court in appropriate circumstances)
4. Purchase Price Resulting Trust (implied by a court in appropriate circumstances)
5. Constructive Trust (implied by a court in appropriate circumstances)

Trusts are a creation of Equity

1. No consideration
2. Agreement not made in a deed
3. Doctrine of privity means that S and not B has the right to enforce that contract

Equity accepted that T had the right to the property at common law, but impressed T’s
holding of that legal right with a duty owed to B.

The Trustee

Trustee is the legal owner of the property

Smith v Anderson: ‘A trustee is a man who is the owner of the property and deals with it
as principal, as owner and as master, subject only to an equitable obligation to account to
some persons to whom he stands in the relation of trustee’

Implications of a Trust

1. Trust property is no longer settlor’s to use as he pleases

a. JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev (effective control)
i. highlights that a settlor cannot avail themselves of the benefits of
putting assets in trust whilst at the same time in reality maintaining
control over the assets through extensive non-fiduciary personal
powers
ii. In this case, Mr. Pugachev had the power to not act in the interest of
the beneficiaries as a class and could add or remove other
 discretionary beneficiaries such that he himself could remain the sole
beneficiary, the power to veto the trustees decisions and the power
to appoint and remove trustees
iii. Birss J noted that what may or may not be a sham are “the acts or
documents which purport to set up a trust” (Snook v London and
West Riding Investments [1967]). The parties to a trust deed must
have intended subjectively to create different rights and obligations
from those appearing in the trust document and they must have
intended to give a false impression of those rights and obligations to
third parties.

2. Similarly, trust property is no longer the trustee’s to use as he pleases

a. There is an “irreducible core” as held in Armitage v Nurse [1998] Ch 241, 253
i. “There is an irreducible core of obligations owed by the trustees to
the beneficiaries and enforceable by them which is fundamental to
the concept of a trust. If the beneficiaries have no rights enforceable
against the trustees there are no trusts”

Duties of the Trustee

Trustee is subject to 3 main duties owed to the beneficiary 1-080 Hayton & Mitchell

1. Comply with the terms of the trust

a. Meaning: T lacks the power, as against B, to enter into a transaction that is

authorised neither by the terms of the trust nor by the general law

b. If T does not comply with the terms, eg sells the trust fund, B has the right to
claim that T must dip into T’s own pocket to reconstitute the trust fund. It is a
claim to enforce T’s primary duty as trustee “properly to preserve the trust
fund”. This claim is available to B without B needing to prove that T’s
unauthorised act caused B any loss.

2. Fiduciary duty to act exclusively in the interests of B

a. Meaning: T must not allow her personal interest to conflict with the interest
of B by, for example, using her own benefit an opportunity offered to T in her
capacity as a trustee (no conflicts rule)

3. Take reasonable care in exercising her powers under the trust when, for example,
managing or investing the trust property

Trusteeship as an Office
 1. If T is not properly performing her duties as trustee, B can apply to court to have T
replaced by a new Trustee, in whom the trust property will then be vested

Nature of the Beneficiary Rights Under Trust

There are two broad views of the rights of a beneficiary under a trust, namely the
1. Property view
2. Obligational view

Property View

This is the view that the beneficiary’s rights under a trust are “proprietary” in nature, as
they are different from purely personal rights. This is because they can be asserted against
persons other than the trustee, for example third parties if they manage to get hold of the
assets and are not bona fide purchasers for value without notice. This process is known as
tracing and claiming. Similarly, if the trustee acquires new assets in exchange for those held
on trust, the beneficiary can assert rights in substitute assets.

BUT, at the same time, there are ways in which a beneficiary’s rights are not the same as
legal ownership. A legal owner can assert his rights against anyone else in the world, but a
beneficiary’s rights can be defeated by a bona fide purchaser. This is emphasized in the case
of Akers v Samba at [51] “The beneficiaries’ rights under the trusts] were protected rights
that were always limited and in certain circumstances capable of being overridden by virtue
of a rule of law governing equitable rights, protecting in particular (under common law)
bona fide third party purchasers for value (equity's “darling”[)]…”

Take away from Shell Uk Ltd v Total Uk Ltd

The beneficiary cannot sue if the trust property is negligently damaged, the correct party to
sue is the trustee (cf Shell UK v Total)

It was held that such a claim could only be brought forward if the trustees were joined as
parties to the proceedings. The inclusion of the trustees would mean that their legal title to
the property could be used to establish the claim, even though the loss was suffered by the
beneficiary. The court clearly considered the beneficiary to have an equitable proprietary
interest and recognizes that it would be a triumph of form over substance to deny the
beneficiary a remedy simply because legal title to the property was vested in bare trustees.

Hence, if the property is negligently damaged, the beneficiary is unable to sue as the correct
party to sue is the trustee who holds legal rights.

The property view hence emphasizes that the rights relating to that property are split
between the legal proprietary rights of the trustee and the equitable proprietary rights of
the beneficiary. This is such that if the trustee becomes insolvent, the trust property
cannot be transferred to the trustee’s creditors since the property belongs to the
beneficiaries in equity.

Obligational view

This view focuses on the nature of the trustee’s duties to the beneficiary as compared to the
property view which focuses on the beneficiary’s connection to the trust assets. Hence, a
beneficiary’s rights are seen to be more an encumbrance annexed onto the trustee’s legal
ownership of the property.

This view also aligns with Hayton & Mitchell’s definition of a trust.

‘A trust is an equitable fiduciary obligation, binding a person (called a trustee) to deal with
property (called trust property) owned and controlled by him . . . for the benefit of persons
(called beneficiaries . . .) . . . any one of whom may enforce the obligation.’:

The obligation component emphasizes that the trustee owes an obligation to the
beneficiaries as regards to the management and use of that property. This is significant
because it means that a trustee is unable to benefit from that property for themselves,
save to the extent that they might also be a beneficiary of the trust.

Contractarian account of the trust

Langbein considers that the trust should be considered as a bargain containing how the
trust assets should be managed and distributed. Further, Langbein supports both the
obligational and property view of the trust, in which the obligation derives from the
contract. Rather, a trust is a “hybrid of contract and property” because it embodies a
contract about how property is to be deployed.

However, though the contractarian account of a trust is useful, the key problem of
Langbein’s thesis is his emphasis on a contract or bargain between the settlor and the
trustee. Though in a commercial context of the trust there will be bargains or contracts, this
may not be so common in contexts such as family, in which such agreements and
negotiations are less likely to take place. Further, even in a commercial context, it is wrong
to say that a trust is a bargain. This is because the typical trust structure involves the settlor
transferring property for the trustee to hold on trust for the beneficiary. However, once the
settlor transfers the property to the trustee, the settlor drops out of the picture and there is
no negotiations as the settlor has no rights to enforce the bargain unless they have reserved
powers.

Fixed trusts, discretionary trusts, and mere powers

Fixed trusts

Under a fixed trust, beneficiaries have fixed entitlements.

E.g. “I give the property to my husband, X, to hold the property on trust for
my 2 twin children, A and B, to be distributed between them in equal
shares when they turn 21”.
 X’s power - To distribute the property
X’s duty - To distribute the property to A and B when they turn 21

Under this trust, X has the power to distribute the property, but also has a duty to
distribute the property to A and B when they turn 21.

However, a problem of the trustee having no discretion of who or how much they
give is that is the situation may change over time. For example, one child strikes the
lottery while the other could get a terminal illness and need the assets in the trust
more. However, the trustee has no power to change the decision given that the
decision is made prior. Hence, the needs of the children cannot be seen in the future
and thus may be seen as inflexible.

Discretionary trusts

Under a discretionary trust, the trustee has the discretion to select beneficiaries from
among a class.
E.g. “I give the property to my husband, X, to hold on trust, where X shall
apply the fund in favour of any person in the world who has not studied at
NUS Law, which X may select at his absolute discretion”.
X’s power - To select people as beneficiaries
- To distribute the property to appointed beneficiaries (cf fixed trust)
X’s duty - To distribute the property (“shall apply the fund”)
- (ancillary duties) e.g. to consider periodically whether or not to
appoint anyone as a beneficiary
Note: X has no duty to distribute to any particular person within the class

Under this trust, X has the power to select people as beneficiaries, and the power to
distribute the property to appointed beneficiaries (cf fixed trust above). While X has a
duty

Mere powers

When T has a legal power to do X, he has a legal ability to effect some legal change.
E.g. “I give the property to my husband, X, to hold on trust, where X may
in his sole and absolute power and discretion appoint in favour of any
person in the world, except those who had studied at NUS Law”.
X’s power - To appoint a beneficiary / beneficiaries
X’s duty - NIL
Note: X has no duty to appoint a particular person or anyone at all (“may…appoint”)

Express, constructive, and resulting trusts

Express trusts
Express trusts are voluntarily created by a settlor, which can come into effect while
the settlor is alive (inter vivos trusts) or be created to come into effect after death
(postmortem trusts).
The classic example of an express trust involves a settlor creating a trust, with the
trustee holding for one or more beneficiaries.
Modern trusts can include parties other than S, T, and B (as provided by the trust deed)
 Enforcers: someone other than the beneficiary who can enforce the trustee’s duties.

Protectors: someone who has the power to direct the trustee in how they administer the trust (e.g.
direct trustee as to what investments to make)

Managers: someone who has power to undertake day-to-day management of the trust assets
(common where the trust assets comprise an active business)
The trust is a highly flexible instrument

Duties owed by the trustee to the beneficiary can be customised (like in a contractual arrangement).
Beneficiaries therefore can get different entitlements: (a) an immediately vested equitable right in a
fixed trust; or (b) a mere hope/expectation that he may be chosen as a beneficiary in a discretionary
trust (a person is not a beneficiary until he has been selected).

Constructive trusts
Constructive trusts arise by operation of law (RL: as will be explored later, this
terminology is quite imprecise).
Resulting trusts
Resulting trusts arise by operation of law (RL: as will be explored later, this
terminology is quite imprecise).

Distinguishing the trust from other relationships

Similar Difference
Contracts 1. Trusts don’t require agreements for
their creation while contracts do
2. Contracts are purely personal rights
while the rights under a trust can b
seen as proprietary as they can be
enforced against third parties
3. Then why not use CTPA? This is
because if you use the CTPA, trusts
and contracts don’t have the same
types of remedies. Under the rights
from a trust, one can do Tracing
and Claiming.
4. Consideration
5. Intention to create legal relations

Gifts 1. If A gives to B, then B is the

absolute owner and owes no duties
to A. However, if A the settlor gives
to B on trust, B owes duties to the
beneficiary and cannot use the
asset for himself.
2. Gift is a donative intent
Agency 1. An agent may owe 3. Trustee is not an agent of the
similar duties that beneficiary.
a trustee owes to 4. An agent is subject to the direction
the beneficiary of by the principle. However, the
the trust trustee is not subject to the
2. Both relationships directions of the beneficiary.
 are fiduciary 5. Once a trust is created, it cannot be
revoked, unless that power was
reserved by the person creating it.
In most cases, a principal may end
an agency at any time.
6. An agency relationship normally
ends upon the death of either party.
A trust is not terminated by death.
7. An agency relationship is
contractual. It is a debtor-creditor
relationship. A trustee derives their
powers, and duties, by operation of
law and equity. It is an equitable
relationship.

Debts 1. 1. Debt- Duty to pay a sum of money

(creditor- to the creditor
debtor r/s) 2. Debt (personal obligation) while
trusts are (beneficiary has
proprietary rights under the trust)
1. A, , owes B (ordinary creditor) $10.
If A insolvent, B ranks pari passu
with other ordinary creditors
2. But if Trustee A has a duty to pay
$10 to B under the trust, then B
does have priority to recover the
$10 from the trust estate, over and
above A’s other creditors
3. The significance of whether the
beneficiary can be considered to be
creditor of the trustee is illustrated in
the case of Re Lehman Brothers
International (Europe)
4. In this case, it was held that former
clients of the company who held
equitable rights in property that was
held by the company on trust for
them were not creditors. A creditor
was defined as anybody with a
monetary claim against the
company that, when payable, would
constitute a debt. However, a
proprietary claim to trust property
would not constitute a claim in
respect of a devt owed by the
company, since the beneficiaries of
the trust would have a claim to the
property that was held on trust
rather than to the value of that
property.
 Bailments 1. Both involve 1. Difference lies in the location of
obligations to the legal ownership, since the
look after trustee typically obtains legal
property for the ownership to property whereas
benefit of the bailor retains legal ownership.
another, with This is seen clearly when the
the trustee trustee or bailee attempts to sell
holding the the property to a third party
property for the without authority to do so. The
beneficiary and remedies available are the
the bailee for differences. IF the bailee sells the
the bailor. property, then the bailor has the
right to sue the third party for the
tort of conversion, even if the third
party was a good faith purchaser
of the property for value, since
bona fide purchase does not
defeat the bailor’s legal title to the
property. Whereas if the trustee
sells the property in breach of a
trust to a purchaser for value in
good faith the beneficiary will not
have a claim in conversion
because they do not have a legal
proprietary interest in the
property, and the equitable
proprietary interest will be
defeated by virtue of the recipient
being a bona fide purchaser for
value.
2. Therefor, the distinction is that
that bailee does not have legal
title to the property and is obliged
to manage the property on behalf
of the legal owner, whereas the
trustee has legal title to the
property and is obliged to manage
the property on behalf of the
beneficiary, who has an equitable
interest in the property.
Charges
Companies
Administration
of Wills

Legal, equitable, and beneficial titles

 “Splits” of legal and equitable title

It is absolutely incorrect to say that once T has the legal title and B has the equitable
title that there is always a trust (in other words, Watt, Trusts & Equity is wrong).
“To put it another way, whenever there is a split between legal and
beneficial ownership there will inevitably be a trust as a matter of property
law...
The separation of legal title from equitable property necessarily creates a
trust – it might be helpful to picture trust creation as the process of
splitting the formal/external legal title from the beneficial/inner equitable
interest, as if one were peeling the skin off a banana” (Watt at 25)

Trustee gets the shitty banana skin and the beneficiary gets the good stuff

The banana analogy is incorrect. This assumes that before the creation of any
equitable title or rights, the property already contains two distinct titles – legal and
equitable. This was decisively rejected in Westdeutsche v Islington:
“A person solely entitled to the full beneficial ownership of money or
property, both at law and in equity, does not enjoy an equitable interest in
that property. The legal title carries with it all rights. unless and until there
is a separation of legal and equitable estates, there is no separate
equitable title.

Therefore to talk about [A] ‘retaining’ its equitable interest is meaningless.

The only question is whether the circumstances under which the money
was paid were such as, in equity, to impose a trust on [B]. If so, an
equitable interest arose for the first time under that trust.” (Westdeutsche
at 706).
The “split” of legal and equitable titles does not necessarily create a trust. In
other words, a trust relationship does not arise automatically where there is a “split”
between legal and equitable title (MKC v Kabushiki at [152]-[153]; in the context of
equitable mortgages).
Trusts can exist even where there is no “split” of legal title in the trustee, and
equitable title in the beneficiary. In a sub-trust, B can self-declare a trust over his
equitable title in favour of X. B only has an equitable title, and no legal title.

Beneficial title
This is not really a term of art – it roughly just means “entitled to benefit” to the
property. This is not synonymous with a beneficiary’s equitable title under a trust. As
seen in Westdeutsche, the owner of an undivided legal title can be said to have
“beneficial title” (“beneficial ownership” at 706).

Supervisory jurisdiction of the court

Courts retain supervisory jurisdiction over the administration of trusts (Morice v

Bishop of Durham). Unlike for contracts, a party unsure of how to execute the trust
can go to court and ask for help, which the court can provide.
“As it is a maxim, that the execution of a trust shall be under the controul
[sic] of the Court, it must be of such a nature, that it can be under that
control; so that the administration of it can be reviewed by the Court; or, if
the trustee dies, the Court itself can execute the trust:
a trust therefore, which, in case of mal-administration could be reformed;
and a due administration directed; and then, unless the subject and the
objects can be ascertained, upon principles, familiar in other cases, it
must be decided, that the Court can neither reform mal-administration,
nor direct a due administration” (Morice at 954, per Eldon LC).