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Published by manavmelwani

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Published by: manavmelwani on Oct 19, 2011
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Chapter 2: Property, obligations, andtrusts
Equitable Title
Equitable title exists whenever equity will require the legal owner of property to hold theproperty for the benefit of some other person or group of persons-
The trust is the particular obligation under which the legal title holder is to hold the property forthe benefit of the equitable title holders
The express trust
An express trust is a trust that is intentionally set up-
The original legal owner is the ‘settlor’
Can either create a tr
ust by a ‘self 
declaration’ where he would be the trustee or by
transferring legal title to someone else-
Where an express trust is created in writing, the document containing the terms of the trust istypically called the trust instrument
Beneficial title
Note that it is incorrect to think of the outright owner of a piece of property as having both thelegal and equitable title. He has the title
and per LBW in
, there is noequitable title at all.-
Nonetheless, he will have the beneficial interest of the property. The mistake is thinking he hasboth a legal and an equitable title to the property.
Exercising powers to create an express trust
An express trust is created when a settlor effectively exercises his powers of ownership to do so
A power is the capacity to change or create rights, duties, and other powers
Trusts that arise by operation of law (TABOLs)
The law only recognises capacities to create new rights, duties, or powers where the law wishesto provide a facility to do things in particular ways.
The right to sue someone for damages arises by operation of law on the occurrence of your negligently caused injury because the law regards ita s just that you should be ableto bring an action for compensation
If the settlor has a power to revoke the trust or to appoint new trustees, that power must be anexpress or implied power in the terms of the trust itself; the power derives from the trust terms,
not from the settlor’s position as the one who originally owned
the property
Fiduciary Obligations
Fiduciary obligations are obligations owed to another person to act with loyalty in dealings thataffect that person. Essentially, this means the fiduciary must act solely in the interests of hisprincipal.-
Someone who o
wes that obligation is called a ‘fiduciary’ and the person to whom the duty isowed is generally called the ‘principal’
Typically, equity will regard trustees as owing beneficiaries fiduciary obligations (in addition tothe explicit obligations under the terms of the trust)-
Strictly defined, a fiduciary relationship exists when one person, the fiduciary, has agreed toundertake legal powers to affect the legal position of another, the principal, and the fiduciaryhas a discretion in the way he will exercise those legal powers.-
Or put alternatively, a fiduciary is one who voluntarily undertakes to act as a decision-maker forsomeone else: the fiduciary is empowered to make decisions (legally binding decisions) for his
principal’s benefit (decisions that, therefore, alter the principal’s legal position)
The personal and proprietary nature of the trust
The personal duties of the trustee-
As the trustee has the legal title to the property, he has all the legal rights and powersassociated with the property-
He must however act upon these rights and exercise those powers in accordance with hispersonal obligation to exercise his ownership of the property according to the trust terms-
The trustees obligations are often subcategorised
into ‘administrative’ and ‘dispositive’ duties.
Administrative duties govern the trustee’s power to make contracts and his power of ownership to maintain the value of the trust property (also called the ‘trust corpus’ or‘trust fund’
Dispositive duties are those that require the trustee to dispose of the trust property tothe beneficiaries according to the terms of the trustA trustee contracts in his own name-
Note they are typically indemnified from loss providing they carry out the terms of the trustproperly-
Note also that while the trust relationship and agency relationship are different, nothing stopsthem from occurring together and while beneficiaries are not normally liable for loss, if thetrustee is their agent, they can be. (see
Royal Brunie Airlines
Trident Holdings
Bare Trusts, special trusts, and nomineeships
Under a bare trust, a trustee holds property for a beneficiary on no specific trust terms; the
trustee’s only obligation is to transfer the property to the beneficiary or to a third party as he
A special trust is one created by a settlor with specific termsBare TrustTypically comes about in 3 circumstances-
When interests under a special trust ‘fall into possession’ (e.g. the state of a trust for A to life
then B after A dies)-
By operation of law (e.g. a CT for family homes)-
The intentionally created, i.e., express bare trust also called a nomineeship. This combines thebare trust with a contract. A nominee is a bare trustee who has contractually agreed to complywith various orders the beneficiary makes with respect to the trust property (e.g. a solicitor who
holds his client’s money prior to the purchase of land)
It is said that the nominee or bare trustee holds the trust property ‘to the order’ of the
beneficiary. While this is correct note that in a simple bare trust, the only order the beneficiarycan make is to convey it to himself but in a nomineeship the trustee may have contractuallyundertaken to carry out different sorts of orders.
Legal and equitable title compared
The trustee is the owner at law, and has legal title, while the beneficiary is the owner in equity,and has equitable title-
Equity relies upon the legal owner’s powers that go with legal title in order to secure the benefitof the beneficiary’s equitable title
The nature of the benefic
iary’s right
The beneficiary has the personal right that the trustee comply with his duties, and as a fiduciaryhe must exercise all his powers over the property with the best interests of the beneficiary inmind-
The beneficiary’s right is proprietary in s
o far as it is a right in the trust property itself, i.e. in sofar as its fate is tied up with
the fate of the trust property. If the property is stolen or lost etc…the trust essentially evaporates as there is no property to which the beneficiary’s right
s under atrust can attach.Property in a fund-
Another important aspect of the proprietary nature of the beneficiary’s interest in the trust is
that, in most cases, the interest is an interest in a trust fund. In law, a fund is a collection or set

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