The English Law on Trusts - Essay Example

The English Law on Trusts Introduction In dealings with land and rights to land, the principles on trust are important. Incidentally, the laws on trust in the global landscape originated from the English legal system. In sum, the statutes and jurisprudence of England regarding trusts contributed a lot to the world on the matter. Generally, trusts are components of the law on property. When speaking of trust, it is created when somebody (called the settlor) gives an asset or a right to an asset to another (called the trustee). In old England, the jurisdiction on trusts was under royal authority vested in the king.1 The relevant processes were coursed through the Lord Chancellor whose court, the Court of Chancery, was therefore established for remedies not available in the common law courts.2 At this point, it is deemed necessary to know why the trust law came into being. It actually started during the years of the Crusades, generally the wars waged by European Christians against Muslims and those who did not abide by the Christian faith.3 The Crusaders, mostly if not all of whom were landowners, were the key factors in the development of the trust law. Leaving his real estate properties in the homeland in order to fight under the Crusades, the landowner Crusader had to have somebody he trusted to run and oversee his assets while he was absent or not around. Since land matters were then under the feudal set up, the person left behind by the landowner was charged with the duty of, among others, paying feudal obligations or receiving feudal monies. For this to continue, the landowner would transfer his properties to a friend or anybody of his confidence. It was understood, as a matter of course and of common sense, that the said ownership would be returned back to the landowner when he returned. In so many instances, the Crusaders came home from the wars only to find that the persons to whom they entrusted their properties would not hand over the estates back. During that time, the Crusader was in a sorry state because his claim was not acknowledged or recognized by the common law of England. The courts considered the trustees, also called the legal owners, to be the ones having the right to the lands or properties and who were therefore under no obligation to give the assets back to the returning Crusader. Aggrieved, the Crusades participant had to lodge a petition before the king and the latter would refer the matter to the Lord Chancellor who would decide the dispute according to what he believed in his conscience was just and equitable. At that juncture, the concept and precept of equity became a principle of law. Finding it not just that the legal owner denied the rights of the Crusader or the true and real owner over the properties, the Lord Chancellor decided the issue favouring the latter. During the span of so many years, the court of the Lord Chancellor, later on called the Court of Chancery, continuously recognized the rights of the Crusaders over the abandoned estates left in trust to the legal owners. The relation between the Crusader and the trusted friend or acquaintance became then what has been denominated as a trust.4 In the process of determining the rights and obligations of the parties over a trust in relation to land, lawyers became fixtures to assist which side had engaged their services in the attendant controversies. Owing to the widespread use of trusts including whatever claims and counter-claims involving the same, the benefits supposedly due to the landowners had been reduced because the legal professionals tried all they could to manipulate the rights of the landowners and fragmented those rights in the course of the suit or litigation.5 The governing and applicable laws The Law of Property Act 1925 was enacted in order to govern dealings and relations over real properties. In part, the matter of trusts connected to land ownership must have also be in the mind of the legislators when the law was being deliberated and finally passed upon. The statute enumerates clearly the estates covered by it which can be transferred or can have rights pertaining thereto by operation of law. These are the estates in absolute ownership and possession and those which are leased for a certain number of years fixed by the parties. Rights and charges pertaining to land are likewise enumerated such as easements like the easement of right of way and the easement of right to light and view, mortgage and land taxes, among others. Interestingly, it also mentions that any other estate, interest or charge in connection with lands or dealings thereon fall within the realm of equitable interests. Necessarily, trusts belong to the generic ambit of equitable interests.6 However, since equity issues were, and still are, hinged on the sound judgment of the court or tribunal having jurisdiction thereof, the same are to be weighed purely on the resolution of what is just and reasonable. Up to and until the passage of the Law of Property Act 1925, the true owner of the estates have no statutory basis to lean on in any effort to establish the fact that the legal owner was only holding the property in trust for him and that he, the true and real landowner, was the beneficiary of the fruits and gains produced by the realty or realties under trust. It was under these circumstances that it was probably observed that the benefits and rights of the landowner became fragmented in view of the widespread use of trusts even when possibly there was none or those claimed were questionable ones. Apparently, the predicaments were founded on the exact definition of trust and on the specific purported provisions of the law on these concerns. In short, there was then no given meaning for the trust terminology and there was no particular written law to deal with trusts. Also in 1925, there was a new law, the Settled Land Act 1925, which was intended to streamline relations and dealings on land. Unfortunately, it could not go well hand in hand with the Law of Property Act 1925 , because only estates that could be covered by the Settled Land Act 1925 could be brought into the operations of the former law. In 1996, the Trusts of Land and Appointment of Trustees Act 1996, or TOLATA 1996 for short, was enacted into law as an Act of Parliament of the United Kingdom to be made effective in England, Wales, Scotland and Northern Ireland, by which the laws related to trusts were altered. The new law was evidently for the purpose of reforming the Law of Property Act 1925 as far as concerning the provisions on trusts. Section 15 of the law now enumerates specifically what the court will have to take into account in considering the application of a trustee for an order giving him (the trustee) the necessary powers or authorities. These required matters are the intention of the person creating the trust, the purposes for holding the property in trust, the welfare of children who occupy or might occupy a land for his home that will be subject to a trust, and the interests of the secured creditors of the beneficiary.7 Regarding the mentioned creditors, this has to be read in conjunction with the Section 335a of the Insolvency Act 1986 which mandates that the court shall assume that the interests of the creditors of the bankrupt estate outweigh all other factors.8 TOLATA 1996 has introduced several novel provisions. Under Section 25 of the Law of Property Act 1925 (or LPA 1925 for short), the trustees were implied to have the power to postpone the sale of the property held in trust except in cases where the contrary intention appeared. On the other hand, the new law (TOLATA 1996), particularly Section 4 thereof, gives the trustees the power to defer the sale despite the beneficiary expressly directing them to effect the sale immediately. The provision on the powers of the trustee to partition the land in instances where there were proceeds of sale under Section 25 of the LPA 1925 has been repealed by Section 7 of the TOLATA 1996. Section 9 of the new law now allows the trustees to delegate their functions to the beneficiaries provided that the latter are of full legal age and are beneficially entitled to an interest in the possession of the land under trust. The delegated tasks must be those which relate to the land. Section 26 (1) of the old law, LPA 1925, has been replaced by Section 10 of TOLATA 1996 which limits the power requiring consents to a transaction related to the land. In instances where the consent of more than two persons is needed by the disposition creating the trust, the consent of any two of them will be enough in favour of a purchaser from the trustees for as long as the trustees are not trustees of land held under charitable, ecclesiastical or public trusts. This legal condition however applies only to a purchaser. The duties of the trustees to secure the consents of all the persons named remain. Also, as far as concerning the purchaser, the consent of a minor is not required although the trustees must still acquire the consent of the parent or guardian of that infant. Failing to do so will constitute a breach of trust. A significant new notion in TOLATA 1996 is provided for in its Section 11 which appears to expand Section 26 (3) of the LPA 1925. It is now mandated that the trustees have to consult the beneficiaries in connection with any function connected to the land which is covered by the trust. This clearly implies that before taking any decision on the land, the trustees must first consult with the beneficiaries and hence, giving better rights to the latter. Sections 12 and 13 of TOLATA 1996 respectively provide for the right of the beneficiary to the occupation over the land under the trust and the limitations thereon if there are two or more beneficiaries entitled to so occupy. This confirms a benefit in favour of the beneficiary albeit there is a restriction in instances where there are two or more qualified for the said occupation. There are instances when the beneficiaries are all of age and capacity and are the only persons having interest in the trust. Under Section 19 of TOLATA 1996, these beneficiaries are given the power to require the trustees to retire and to appoint their replacements. All the above-cited changes concerning trusts are among the fundamental amendments introduced by TOLATA 1996 which avoid the fragmentation of the benefits in favour of the settlor or beneficiary. To these extents, among others, the new legislation may be considered to have gained some success. Other developments The Land Registration Act 2002 must also have inter-connected advantages to the whole trust law framework in the United Kingdom. Together with it are the recent developments in land registry functions and operations the main purpose of which is to maintain well and better develop an effective register of all titles to freehold and leasehold lands in England and Wales. Consisting now of more than twenty million titles, the Land Register is the largest in the world among government and privately managed registers. It has been open to the public since 1990 and has the missions to provide the best service in the world for guaranteeing ownership of land and to effectively facilitate property transactions. For every single minute, around £1 million worth of property is recorded or processed for both England and Wales.9 As of 2008, the Land Registration Act 2002 oversees the official affairs and activities of the HM Land Registry in coordination with the Land Registration Rules.10 This novel statute, replacing the old albeit similar system under the Land Registration Act 1925, is mainly to keep a general register with its given scope of title registration.11 The operation of the land register as sanctioned by the Land Registration Act 2002 affords the convenient process of registering all dealings and transactions involving properties under trust. Under these circumstances, any such registration will be an official notice to the whole world and not just a simple conveyance of information. For instance, registering a prior undertaking or encumbrance is the most proper manner of warning a prospective buyer or any interested person for that matter about the said undertaking or encumbrance. It is no overstatement to say that the recording of land transactions made available to the public is an effective and efficient way to deter frauds, lapses, mistakes and misunderstandings in dealings and transactions over lands. Necessarily, if these lands are under or subject to trusts, the sound and wholesome relationship between the settlors or beneficiaries and the trustees will most likely always be maintained. Given that registration has been made compulsory, good organization and order will come along the way of trusts and the parties concerned. With mandatory systematic recording in place, there can be sufficient safeguards to alert and protect the public as people deal and transact daily on lands which may have bearings on trust relations. Along that line, the fragmented benefits of the beneficiaries become whole while the interests of the trustees and third persons are not unreasonably prejudiced. Equity will continue to prevail as good faith is consistently documented under applicable rules. References Ball, Jane. The Boundaries of Property Rights in English Law. Netherlands Comparative Law Association. [internet] Accessed December 7, 2009. Available at: Court of Chancery. Encyclopedia Britannica. [internet] Accessed December 7, 2009. Available at: English trusts law. Wikipedia. [internet] Accessed December 7, 2009. Available at: History. Trust Law. Wikipedia. [internet] Accessed December 7, 2009. Available at: HM Land Registry. Wikipedia. [internet] Accessed December 8, 2009. Available at: INSOLVENCY ACT OF 1986. CHAPTER V - EFFECT OF BANKRUPTCY ON CERTAIN RIGHTS, TRANSACTIONS, ETC. 335A. Rights under trusts of land. Iva.co.uk. [internet] Accessed December 7, 2009. Available at: Land Registration Act 2002. OPSI Office of Public Sector Information. Part of the National Archives. [internet] Accessed December 8, 2009. Available at: Land Registry. [internet] Accessed December 8, 2009. Available at: http://www.landregistrycareers.co.uk/index.html Law of Property Act. PART I. GENERAL PRINCIPLES AS TO LEGAL ESTATES, EQUITABLE INTERESTS AND POWERS. United Kingdom Legislation for Vanuatu. [internet] Accessed December 7, 2009. Available at: The Crusades. [internet] Accessed December 7, 2009. Available at: http://history- world.org/crusades.htm Trusts of Land and Appointment of Trustees Act 1996. Section 15 Matters relevant in determining applications. Part 1 Trusts of Land. OPSI Office of the Public Sector Information. Part of the National Archives. [internet} Accessed December 7, 2009. Available at: < http://www.opsi.gov.uk/acts/acts1996/ukpga_19960047_en_2#pt1-pb2-l1g2> Read More