The nature of equity and the trust

The trust is equity's central institution: a juridical relationship where the trustee holds legal title to property whilst the beneficiary holds an equitable interest, creating a distinctive 'dual ownership' structure. This bifurcation—unknown to civilian systems—enables one person to control property for another's benefit, with equity enforcing the trustee's obligations through its historically separate jurisdiction that 'acts in personam' (through personal orders) but generates proprietary consequences. The principle's genius lies in permitting sophisticated property arrangements whilst maintaining doctrinal flexibility through equity's foundational appeal to conscience.

Earl of Oxford's Case (1615) 1 Ch Rep 1: Established that where common law and equity conflict, equity prevails—now codified in Senior Courts Act 1981 s 49. This jurisdictional supremacy underpins the entire equitable system.

Keech v Sandford (1726) Sel Cas Ch 61: Trustee who renewed lease in personal capacity held it on trust for beneficiary, establishing the strict prophylactic 'no-profit' rule. Foundational to modern fiduciary law's rigorous standards.

Westdeutsche Landesbank v Islington [1996] AC 669: Lord Browne-Wilkinson held equity operates on the conscience of the legal owner; trusts arise only when conscience is affected by knowledge. Controversial for personalising resulting trusts and conflating categories.

Stack v Dowden [2007] UKHL 17: Baroness Hale's 'holistic approach' to beneficial interests in domestic property presumes joint tenancy where legal title shared. Marks shift from strict resulting trust analysis to contextual reasoning.

Jones v Kernott [2011] UKSC 53: Courts may impute (not just infer) common intention where actual intention unascertainable. Doctrinally contentious: does equity truly permit imputation or is this disguised discretion?

Courts first determine whether a valid trust exists: (1) certainty of intention to create a trust (not mere moral obligation); (2) certainty of subject matter (trust property); (3) certainty of objects (beneficiaries). Express trusts over land require signed writing (LPA 1925 s 53(1)(b)); dispositions of equitable interests need written assignment (s 53(1)(c)). Resulting/constructive trusts are exempt from formalities (s 53(2)).

Once established, trustees owe fiduciary duties enforceable in equity: loyalty, no-conflict, no-profit. Breach triggers equitable remedies—account of profits, equitable compensation, proprietary remedies via tracing. The beneficiary's interest binds third parties except bona fide purchasers without notice. In analysing trust claims, courts increasingly employ fact-sensitive, contextual approaches (especially post-Stack/Jones) whilst maintaining that equity supplements rather than contradicts common law rules.

Students wrongly claim the Judicature Acts 'fused law and equity'—they fused administration only; substantive rules remain distinct. Never invoke 'unconscionability' as self-explanatory: explain why conduct breaches specific equitable doctrine. Distinguish carefully between resulting trusts (presumed intention/failed purpose) and constructive trusts (imposed to prevent unconscionable retention)—post-Westdeutsche the line is blurred but categories matter. Avoid treating maxims as binding rules; they are interpretive guides only. Remember equity is increasingly statutory—always check LPA 1925 s 53, Trustee Acts, etc. The beneficiary's interest has both proprietary and personal features; avoid absolutist claims either way.