Equity and Trusts

What is Equity ?

Equity in general can be referred to the rules and regulations developed by the court to mitigate the severity of common law. However, it is important for the community to undertake such rules so as to provide the relief to the common people regarding the harshness of the natural laws (Hudson, 2014). Herein, researcher focuses on understanding of the roles of equity, equitable principles and equitable remedies in the English law has been focused on. Along with this, investigator will discuss different types of trust and specifically secret trust and it creation procedure. Lastly, implementation of these trusts on the basis of law. On the basis of understanding made through these aspects further essay will critically analysing the statement of “the rules of equity make a clear distinction between express trusts and constructive trusts. This is to the advantage of the beneficiaries.”

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According to the English Common Law, equity can be defined as the set of maxims that supremacy over all the legislations and from which all the other respective civil laws are flowed (Evansand Jones, 2003). Furthermore, equity is commonly illustrated as the approach used by Court of Chancery in mitigating the harshness of common law as well as permitting the courts to make the use of their discretion and accordingly apply justice on the natural law. The main role of equity system is attributed for contributing significantly towards the development of law. However, these contributions are especially seen in different areas such as auxiliary (new process), exclusive and concurrent jurisdictions. Further, these are the three major categories of the equity system which focuses on different aspects of the common law. Under the auxiliary jurisdiction, equity has helped in rising the new procedures regarding the discoveries made by court of chancery in order of witnesses, interrogations process and the testimonies made on the oath. While in exclusive jurisdiction, equity system helped the common law court in the cases such as partnership, mortgages, bankruptcy, company law, trusts and administration of estates in which it is failed to enforce (Atkins, 2013). Lastly, concurrent jurisdiction can be defined as the wide range of new remedies developed by the equity system in order to enforce rights of both at law in equity.

In addition to it, the major role of equitable principle is to develop basic rules from suits in equity that focusing on treating everyone in fair, equal or ethical way. In other words, development of basic rules and regulation that are applied to achieve the fairness wherever the strictness or harshness of common law or natural law too severe or unkind for the common people (Barnett, 2013). However, the main purpose behind these principles is that it allows the system to address the inflexibilities of the common law in different cases. Furthermore, equitable principles are considered as the most important distinction that exist within the two systems. However, in common law decisions are based on the references to existing legal doctrines while on the other hand, equity system focuses on fairness and flexibility which are further known as maxims of equity (Foxand Krige, 2013).

Lastly, equitable remedy is a remedy that is action prescribed by the court to resolve the matter. However, this type of remedy is used when there is no financial remedy available. Furthermore, it can only be allotted by the judges as it is matter of law. There are several principles of remedies as defined above but the two major equitable remedies are injunctions and specific performance (Hepburn, 2013). In this regard, injunctions can be mandatory or compulsory for the individual to do something. While in case of specific performance, party is require to perform a contract.

In general terms, trust refers to the relationship where property is held by one party for the benefits of another. However, in this trust is created by the settlorwho transfers the property to trustee. In this case, trustee is responsible for holding the property for the trusts beneficiaries. Further, trustee is given the legal title to hold the property but is obligated to act for the good of the beneficiaries (DeMott, 2014). The individual is compensated and reimbursed the expenses but all the profit generated through the property is given to its original owner. The trustee may be either an individual, company or a public body. However, a trust is governed by several terms or stipulations under which it is created.

In context to the significance, trust is considered to be the most innovative contribution to the English Legal system. At present, trust play a vital role in various common law system and its success has enforced some of the civil law judiciaries to involve them into civil code of conduct. Further, the basic principle of trust is defined as the property of any sot may be held in a trust which can be varied for both commercial and personal reasons. A trust can provide benefits in several areas such as estate planning, asset protection and taxes (Kumar, Gopaland Aggarwal, 2016). There are several types of trust that can be used in different situations. However, trusts have different names and it totally depends upon the characteristics or the purpose of trust. A single trust can be accurately be described in several ways such as: a living trust can be often considered as the express trusts because it is revocable trust. Following are the different types of trusts:

Express trust: An express trust is raised when settlor intentionally or purposively decides to create trust over their assets as of now or after death. However, in these cases trust is achieved by signing a trust instrument which can be termed as either will or trust deed. Intention of the parties to create the trust should be shown clearly by the language or conduct (Li and, 2013). Further,in order to exist an express trust, it is important for having the certainty to the objects of the trust and trust property.In context to USA,statute of Frauds provisions require express trust to be evidenced in writing if the trust property is above a certain value or is a real estate. Furthermore, full secret trust is the integral part of express trust which is created when a testator leaves property to a specified person in his will and who agrees to hold the property on the trust for the third party. However, in full secret trust neither the fact of trust and nor the identity of beneficiary is revealed in the will.

Constructive trust: It is just opposite of express trust because a constructive trust is not create by any agreement or contract between settlor and the trustee. However, it is the trust which is imposed by the third party most often by the government as an equitable remedy (Akka, 2014). Further, a constructive trust occurs generally when some wrongdoing is conducted in which wrongdoer has been granted the legal title of some property and acquiring the wrong benefits.The main purpose of constructive trust within the English law is that it helps in delivering the rightful assets to rightful person. It is not necessary that every time,trustee is the person who is responsible for doing the wrong activities but in practice it is often a bank or similar kind off organisation (Robbins, 2014). Furthermore, half-secret trust helps in eliminating the danger if the testator indicates in his will that the recipient of the bequest is not intended to take the property absolutely rather than as a trustee. Through the means of this, identity of beneficiary remains the hidden, but the beneficiary clearly named within the will is seen as the secret trustee.

Secret trust: In general, secret trust can be defined as the trust which arises when property is left to a person or individual according to the will on the understanding that they will hold the property or assets as trustee on behalf of the beneficiaries who are not named in the will. According to the English law, secret trust is a class of trust which is referred as the agreement between testator and trustee come into existence after the death which mainly aims to benefit those person whose name is not defined formally in the will (Equity & Trusts, 2014). However, in this case trustee is responsible to take care of property as well as provide the actual benefits to the beneficiaries. Furthermore, trustee is liable to acquire compensation or can reimburse the expenses made in maintaining the property.

There are several different situation in which trust is implied by the law. However, it is the trust between trustee and party due to which this implied trust is commenced. Therefore, as per the trust law, situation in which one member of the family provides the money to another for the sake of future but asks the third member of the family to hold the money or invest it for the second one (Watt, 2014). However, the trust from one member towards the third member is defined as the trust implied by law. In this, third member is responsiblefor maintaining the trust as well as carrying out the activities for second member.Other than this, implied trust would be the situation in which one party provides the money to another for the purchase of property and let him hold the property until party does not made a gift or as a natural expression of transferring the property. In this, money provider have the trust on the other party due which allow individual to take property on his or her behalf and expects whenever he/she wants, property will be given by the trustee (Hepburn, 2013).Therefore, these are some of the situations in which trust is implied by the law and it is the responsibility of trustee to make sure that trust is being maintained and carried out in effective and efficient manner.

“The rules of equity make a clear distinction between express trusts and constructive trusts. This is to the advantage of the beneficiaries.”

On the basis of above study it can be said that, rules and legislation of equity clearly makes the distinction between express trusts and constructive trusts so as to provide fruitful benefits or advantages to the beneficiaries (Evansand Jones, 2003). In this regard, as per the rules modified in auxiliary jurisdiction eye witnesses helped in creating express trust between the party and trustee. While in the case of forming partnership equity system has led the beneficiaries toattain various benefits that common law is unable to provide. Furthermore, there is clear difference between express and constructive trusts as both plays crucial role in their own situations (Kumar, Gopal and Aggarwal, 2016). Likewise, express trusts provide clearly description of all the terms and stipulation between the parties in the written form so that chances of fraud become very less. While on the other hand, compensatory trusts is implied by the third party in various situation like in case of one family member lending money to another family member along with this, one person asking another person to purchase the property on behalf of him or her. However, in both the trusts, equity system focuses on providing benefits to the beneficiaries so that main purpose of equity system within express and constructive trustsaccording to the English law is that it helps in delivering the rightful assets to rightful person (Li and, 2013).However, it is not essential that every time, trustee is the person who is responsible for doing the wrong activities but in practice it is often a bank or similar kind off organisation.Furthermore, according to trust of equity, beneficiary will either immediately or eventually will receive the income from the trust property or they will receive the property itself. However, the interest of beneficiary depends upon the wordings of trusts document (Watt, 2014).

In conclusion to the above essay it can be said that there are several laws and legislations that are important to abide in context to generate desired results and outcomes. However, understanding the concept of equity system helps in defining the actual benefits or advantages for the beneficiaries in different areas. Further, study entails thedifferent types of trusts such as express, constructive and secret trust and the as per the new modifications of equity system within the common law so that beneficiaries can be benefited. In addition to this, the rules and regulations of equity clearly in differentiating between express and constructive trust so that in various situation parties can be advantaged and benefited.


  • Atkins, S., 2013. Equity and trusts. Routledge.
  • Barnett, S., 2013. Course Notes: Equity and Trusts. Routledge.
  • DeMott, D.A., 2014. Relationships of Trust and Confidence in the Workplace. Journal of Equity and Trusts. 100.p.1255.
  • Evans, M. and Jones, B.L., 2003. Equity and Trusts (Vol. 3). LexisNexis Butterworths.
  • Fox, M.A. and Krige, J.D., 2013. Investigating the sources of performance in South African general equity unit trusts. Investment Analysts Journal. 42(77).pp.45-54.
  • Hepburn, S., 2013. Principles of Equity & Trusts (Aus) 2/e. Routledge.
  • Hudson, A., 2014. Equity and Trusts. Routledge.
  • Kumar, A., Gopal, K. and Aggarwal, A., 2016. Design and Analysis of Lightweight Trust Mechanism for Secret Data using Lightweight Cryptographic Primitives in MANETs. International Journal of Network Security. 18(1).pp.1-18.
  • Li, M. and, 2013. Secure ad hoc trust initialization and key management in wireless body area networks. ACM Transactions on sensor Networks (TOSN). 9(2). p.18.
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