Equity & Trusts Law & Lawyers

Equity developed in the early Middle Ages as a means of alleviating the strict application of legal rules by the then Royal Courts, collectively known as the Courts of Common Law. Those aggrieved would petition the Crown. The appeals were eventually handed over to the Lord Chancellor, then the Crown's principal minister and usually an ecclesiastic. Hence the origins of the jurisdiction as a court of conscience. By the 18th Century, equity had itself become rigid. The origins of the jurisdiction have, however, prevailed and the principles of equity can now be applied in every civil court in the land. One of equity's greatest inventions has been the Trust.

If you would like legal help regarding equity and trusts, including the set-up of a trust, then please complete your free legal enquiry form on the right, or click here.

The key remedies in equity can be grouped into the following topics:

• Declarations;
• Specific performance;
• Rescission;
• Injunctions;
• Compensation and damages;
• Tracing;
• Taking accounts; and
• Delivery up, cancellation and rectification.

Trust law applies whenever one person has placed trust and confidence in another person to manage his or her affairs. The full force of the law of equity governs such relationships and the trust now provides a mechanism for a number of situations, family relationships, charities, pension funds, to name but a few.

Aside from fascinating concepts such as proprietary estoppel and secret trusts, which allow the courts to circumvent formalities in the dealing of property which have been deliberately prescribed by Parliament, an understanding of trusts requires an understanding of a whole variety of technical terms, fiduciary, beneficiary, express trusts, fixed trusts, discretionary trusts, resulting trusts, constructive trusts, purpose trusts, charitable trusts, proprietary and personal remedies.

How do remedies at law differ from remedies in equity?

Remedies at law are generally paid in some amount of money whereas equitable remedies result in a court ordering one party to do (or not do) some action, e.g., an injunction.

Equitable remedies, unlike remedies at law, are granted at the sole discretion of a judge. A jury is not involved. Equitable awards also require that the person seeking equitable relief must have acted in good faith in the matter at hand (i.e., he who asks for equitable relief must come before the court "with clean hands").

Equitable remedies (I am excluding preliminary relief) are sought in those cases when money damages will not make a party "whole" in the eyes of the law, or where the other party has been unjustly enriched. Accordingly, it is not uncommon for courts to require the seller's performance of a contract to sell land to the petitioner if the seller has tried, unlawfully or unfairly, to back out of the deal. That is because, in the eyes of the law, land is unique: no amount of money will compensate for a seller's failure to sell a particular parcel of land he lawfully contracted to sell.

Sometimes equitable remedies are sought in cases where the strict imposition of the law would result in a great injustice to the person seeking equitable relief. The maxim that applies to this case is "Equity abhors a forfeiture."

The existence of equitable remedies is an acknowledgement by the legal system that even when a legal remedy exists, there are a few cases in which the legal remedy (adhering to the letter of the law) would produce an unjust result. These situations are relatively rare, but they do occur.

If you believe you have a matter pertaining to equity law and would like legal help, then please complete your free legal enquiry form on the right, or click here.

Types of trust

The nature or legal structure of a trust, particularly whether it is a fixed or discretionary trust, affects the way its net income (including capital gains) is taxed. Special tax arrangements apply to some common types of trust, including super funds and corporate unit trusts.

Nature of the trust

Trusts can be created by intention of the settlor (express trusts) or through the operation of the law (non-express trusts).

Express trusts are generally classified as either fixed trusts or discretionary trusts according to the nature of the beneficiaries' interests in the income and capital of the trust.

Fixed trusts

The beneficiaries' entitlement to the trust property or income (or both), and the way in which this is fulfilled, is fixed by the trust deed. The trustee has no discretion to alter the prescribed entitlement of the beneficiaries. Very few trusts (if any) are wholly fixed because the trustee generally has some element of discretion.

Discretionary trusts

The trustee has a discretion as to how the income or capital (or both) is distributed between the beneficiaries or different classes of beneficiaries (also referred to as objects). A beneficiary of a discretionary trust has no beneficial interest in the trust property or income until the trustee exercises a discretion under the deed to distribute income or capital in the beneficiary's favour.

Common types of trust arrangements

Trusts are widely used for business and investment purposes. Special tax arrangements apply to some common types of trust.

Unit trusts

These are trusts where the interests of beneficiaries are denominated by units, which can often be bought and sold in a way similar to trading in shares in a company. Unit trusts are used in many commercial arrangements, including managed investment schemes.

Hybrid trusts

A hybrid trust is a trust that has features of a unit trust and a discretionary trust.

Family trusts

Many family trusts are discretionary trusts due to the flexibility they offer - income can be allocated to beneficiaries at the trustee's discretion.

Trusts that qualify as a family trust for the purposes of the trust loss provisions may benefit from concessional tax treatment.

Deceased estates

A deceased estate is technically not a trust while it is being administered, but is treated as a trust for tax purposes, with the executor or administrator of the estate taken to be the trustee.

Super funds

Super funds are generally trusts, and have trustees and beneficiaries (members). However, super funds are taxed differently to other types of trusts.

If you would like legal help regarding equity and trusts, including the set-up of a trust, then please complete your free legal enquiry form on the right, or click here.

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