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Trusts and Equity
A trust can be defined as an agreement wherein money / property is owned and managed by someone for the eventual benefit of another person. It is a confidence reposed by a person in another and has been described by eminent jurists as the most significant achievement of English Jurisprudence.|
The property covered is known as Trust Property and the person creating such trust is known as Settlor or Author of the trust, whereas the person for whose benefit such trust is created is called a Beneficiary. A Trustee is a body for husbanding and protecting the Trust Property for realisation of trust objects to the benefit of the beneficiary.
In UK, a trust is an equitable obligation, which is enforceable in a court of Equity.
However, in India, the concept of equitable ownership is not in vogue. Here, the beneficiary has no legal ownership in the trust property. The Indian Trusts Act, 1882, The Trustee Act, 1925, Variation of Trust Act, 1958, The Administration of Estates Act, 1925 is the body of statutes controlling the principle of trust in India.
Internationally, trusts are recognised under the Hague Convention on the Law Applicable to Trusts
A trust is created by any of the following modes:
a. By writing a trust document which is signed by the settlor and the trustees
b. By an oral declaration, or,
c. By the will of the settlor
The English Legal System formulates 5 types of trusts
In US, all 50 states have different principles governing the law of trust. However, efforts are on to minimise such differences by applying the provisions of Uniform Principal and Income Act
- Life Interest Trust
- Accumulation and Maintenance trust
- Discretionary Trust
- Bare trust
- Charitable trust
The term ‘Equity’ is derived from the Roman word ‘acquitas’ which means equalisation.
Equity can be looked upon as a redress mechanism which levels down any undue and discriminatory preference resulting in denial of justice.
In UK, Equity is a part of English Jurisprudence which denotes the body of rules administered by the Court of Chancery to supplement the principles of Common Law.
The concept of Equity is based on the principles of Natural Justice, but it does not supersede the existing law. The object of Equity comes from the necessity to do justice according to moral law.
In India, there is no separate court of equity, but a number of principles of equity, justice and good conscience have been included in the substantive law of the land.
The Law of Equity involves twelve maxims which are based upon the principles of rights and duties and can be looked upon as the general philosophy of Equity. These maxims are known as ‘Maxims of Equity’ and they collectively constitute the doctrine of Equity.
The maxims are:
- Equity will not suffer a wrong without a remedy
- Equity follows the Law
- He who seeks Equity, must do Equity
- He who comes to Equity , must come with clean hands
- Delay defeats Equity
- Equality is Equity
- Equity looks to the intent rather than to the form
- Equity looks on that as done which ought to have been done
- Equity inputs an intention to fulfill any obligation
- Equity acts in personam
- Where Equities are equal, the first in time shall prevail
- Where there is equal Equity, the law shall prevail