As stated in previous instalments, the motivation behind this series of articles is to explore certain myths surrounding the relationship between the civil and common law families. The next myth up for investigation is the suggestion that civil systems do not have the concept of a trust. After exploring the traditions of both families, I will look at the laws of Scotland, South Africa and Quebec and distinguish which elements are more like one family or the other.
As students will know from their second-year studies, a trust is an equitable construct. As such it is useful to take a brief look at the Roman law and English law traditions of not only trusts butalso ‘equity’. Both families have two branches of law. English law has the common law and equity, and Roman law has the ius civile and the ius honorarium. Koops and Zwalve believe that the ius honorarium and equity serve the “same end”. This “end” is “support[ing], amend[ing] and correct[ing] the other branch of the law” in their family, 1 so that the judicial system produces outcomes that are fair and just.
Equity
The Court of Chancery, headed by the Chancellor, was established during the medieval period. At first, it was more like an administrative body than a ‘court’ in the modern sense. However, throughout this period, the common law courts ceased to apply considerations of reasonableness and fairness when construing the law and interpreting the facts of a case. 2 In response, during the 1530s, the Chancellor’s activity became less departmental and more judicial. He“did” discretionary justice in an attempt to achieve equity in accordance with Aristotelian conscience.3 Equity took on a more modern shape after the Restoration in the 17th century.4 However, running two systems (law and equity) concurrently will undoubtedly cause tension. By the 19th century the ancient and complicated court system was struggling. The two branches of law were in often in conflict with each other and the lack of definition and clarity between the common law courts and Chancery caused significant administrative problems. In particular, the blindness of courts(where one court refuses to acknowledge the existence of a construct of another court) was very problematic due to the immense amount of wealth placed into trusts. Equity enforced trusts but the common law courts did not. As such, the need for predictability was great.5 The Judicature Act 1873 was introduced in order to resolve these issues by creating a united, concurrent administrative of these separate bodies of law. 6
Certain guidelines developed over the years to regulate the relationship of these two bodies of law. First, the rules of equity prevail over those of the common law. 7 However, the supremacy of equity is not as practically significant as it sounds because equity only presupposes the common law, it does not repeal it. Second, equity acts “in personam” and so tells the individual parties what action they must take to act in accordance with conscience. The common law courts can do this too but can also act “in rem” and exercise jurisdiction over property. The need to show a proprietary interest in equity developed from the need to show a substantial injury not merely emotional. Third, equity favours principles(it has a focus on outcomes or objectives) rather than rules (which focus on controlling behaviour or conduct). Fourth, equity is “exceptional”. Parties should only require equity as relief to the inadequacy of the common law or for formal rules such as the formation of trusts. Fifth, equity is exercised as a discretion rather than as of right. Sixth, equity has a variety of more coercive remedies (such as specific performance, injunctions, or a constructive trust) rather than merely monetary damage which is the common law’s preferred relief.
Trusts
A trust is an equitable construction developed to help manage the ownership of property and other assets.There are two level of ownership of the trust property; legal ownership, invested in the trustee and equitable ownership, invested in the beneficiary. The trustee holds the property on trust for the beneficiary and is subject to a fiduciary duty towards them. Lord Millett described the trustees’ obligation to act in good faith and account for their custody of the trust assets to the beneficiaries or objects as “the irreducible core” of the trust.8 There are many different ways in which a trust can be created, from an express trust, implied constructive trust to resulting trust, but a trust will always require the presence of certainty of subject matter and objects. Although there are concurrent titles to the property, there are certain rules that apply qualify the stark distinction between titles. For example, the sole beneficiary (Saunders v Vautier)9 or the multiple beneficiaries of a trust can demand disillusion of the trust (if unanimously agreed) (Curtis v Lukin)10.
Ius Honorarium
Ius honorarium (referred to by some as the ius praetorium) is described by Papinian as “aiding, supplementing, or amending, the Civil Law, for the public welfare”. 11 In classical Roman law it was created by the Praetor (a mostly political figure, somewhat like the Chancellor). The ius honorarium took the form of praetorial remedies; such as the possessory interdicts and Actio Publiciana (discussed in the previous instalment) for example. The Praetor could not alter or revoke the ius civile as they had no legislative authority nor could they create a substantive legal develop of their own in the way that Chancery created a trust. After the Julian’s codification of the Edict, known as the Edictum Perpetuum, in 135 AD the only way that ius honorarium could be developed was through the interpretative work of jurists. The ius honorarium was incorporated into the Digest around 533 AD. As a result, it became part statutory law. After this the interpretation of the law of equity was the work solely of the Emperor and the Prefect of the city. 12
Trusts
Johnson makes it clear that “trusts did not exist within the civil systems that are derived from Roman law, and even in Roman law itself.” Instead, trusts come entirely from common law legal systems. 13 However, the Augustinian fideicommissum parallels a trust in function. The fideicommissum is the entrusting of an object to the good faith of the recipient for the benefit of another person. 14 There were different types of these relationship, some for the transfer of slaves (manumission) or the transfer of an estate (or part of it) (fideicommissum hereditatis).
Equity
Scots law does not recognise an“institutional or doctrinal separation” of law and equity. 15 However, it does take into consideration the interests of natural law, fairness, and justice. 16 InScots law, equity is considered as part of the common law. 17 The Court of Session, the Supreme civil court of Scotland, has a special equitable jurisdiction called the nobile officium. It is very specific, highly exceptional as it deals with a cases in which there is no legal authority and does not require a judicial decisions but instead requires an urgent and extraordinary solution. 18 However, this procedure cannot be used to“derogate from statutory provision” nor can an appeal regarding statutory construction be made. 19On top of this, there are many “well-established” equitable principles that the courts may apply. 20
Trusts
The origins of the Scots law trust are unknown. Reid states that it has existed from the “earliest times”.The influence of English trust law made its impact mostly after the mid-19th century. 21 On top of this, the basic structure of a Scots law trust is “fundamentally different” from an English trust. As Scots law does not recognise the division between law and equity it cannot divide ownership into legal and equitable categories as is done in anEnglish trust.22 This is known as the“dual patrimony theory”. When a person becomes a trustee, they acquire a second patrimony: they have their private patrimony as always and a trust patrimony.The trust patrimony consists of the trust property which is owned by the trustee and any personal obligations they have incurred in the proper administration of the trust. In the case of multiple trustees, the trust patrimony is owned by them jointly. Reid explains that: “The assets of one patrimony cannot normally be transferred to the other. And if an asset is sold from one patrimony, the proceeds of the sale are paid into the same patrimony, each patrimony thus operating its own real subrogation.” 23 As such the difference is between the categories of asset (ordinary patrimony and trust patrimony) not the level of ownership. However, there are some similarities between Scottish and English trusts. Like in English law, the trustee in Scots law has ownership over the trust assets and a fiduciary duty towards the beneficiaries of the trust. This means that the trust property does not go the trustee’s creditors upon insolvency. However, the right of the beneficiary is personal not proprietary. 24Moreover, the beneficiaries’ have rights against trustees for breach of trust (for example, a transfer of the property without value or the trustees acting outwith their powers). 25
Equity
South African law follows the traditional civilian conception of equity as an “interpretive and norm-filling concept to mollify the strictness of the law in appropriate circumstances”. 26 As in Scots law there is no institution separation between law and equity, it is simply part of a uniform system of legal rules. 27 Further, like English law, South African courts have stressed that it is their duty to apply the settled rules of the law. De Villiers CJ explained in Estate Thomas v.Kerr: that the exercise of equitable jurisdiction and the application of an equitable principle must not “defeat the old law but prevent any injustice from its rigid application”. 28In fact there is an interpretative presumption that no legislative enactment intends to achieve unjust and inequitable results. 29 The new South African constitution strives to protect the country’s transformation from a racist, apartheid regime to an “inclusive, democratic, and constitutional state” 30, includes “constitutional dispensation” (where the rules of law are relaxed for the benefit of an individual or group). Under this dispensation the rules of equity are bound to be applied more extensively or absorbed into the wider values and vision of theBill of Rights and the Constitution.” 31The courts should aim to produce “substantive justice” inferred from the “foundational values of the Constitution” 32. This has created a wider and yet more nuanced concept of ‘equity’.
Trusts
The trust was introduced intoSouth African law in the early 19th century by British settlers and officials. However, due to the South African unitary concept of ownership (that does not separate legal and equitable title) courts “initially struggled to find the correct legal basis for the trust.” 33 In the 1915 landmark case of Estate Kemp v. McDonald’s Trustee34 the court held that the English law of trusts is distinct from and forms no part of South African law. As such, the trust must be given effect by South African law. The court found that the fideicommissum was the correct legal basis for the trust in South African law. 35 Nearly 70 years later, the opportunity to reconsider this decision arose with Braun v. Blann and Botha NNO andAnother36. Here, the court reaffirmed that “the English law of trusts with its dichotomy of legal and equitable ownership…was not received into [South African] law.” 37 However, it rejected the fideicommissum as the foundation of the South African trust as it was confusing “historically and jurisprudentially” to label the trust and the fideicommissum as the same.Instead it was decided that the courts have been evolving a unique SouthAfrican law of trusts by adapting the “trust idea” to the principles of SouthAfrican law. 38
Equity
There is no conceptual distinction between law and equity in Quebecois law. As in Scots and SouthAfrican law, there is no institutional separation either. Even in non-civil law areas of Quebec (such as public law and criminal law) which are derived from the common law tradition, there is no formal concept of equity. However, the“explicit and implicit notions of equity” 39such as unconscionability, good faith, and public order, as well as the prevention of fraud and abuse of rights are well recognised. Some, such as the notion of good faith, are enshrined in code. For example, Article 6 of the CivilCode of Québec reads: “every person is bound to exercise his civil rights in good faith” 40.
Trusts
The trust was introduced toQuebec as an attempt to rationalise the complicated pre-existing law of obligations. In 1889 a “trust concept” was placed into the Civil Code of LowerCanada which covered gifts inter vivos and will. There was some provision for a trust in commercial sectors. 41 The Civil Code of Québec (1994) introduced a different configuration of the trust idea. Like other mixed jurisdictions the trust in Quebec does not rely upon common law property notions, such as the separation of legal and equitable title. Instead, the trust in Quebec law is considered part of the law of obligations. These obligations are related to the trust property, not the trustee. The trustee is only the administrator of the trust property and the trustee’s obligations are owed to the trust not the beneficiary. 42 This is not the same as Scots law where the trustee is the full legal owner and where the beneficiary has direct rights against the trustee. In Quebec, the beneficiary has rights against the trust. Québec was greatly influenced by Lepaulle who once described the trust as a legal person itself.43 However, the nature of the trust under Quebec law is debated. Both interpretation of the code and decisions of the court remain inconclusive. Smith believes that Scots law provides a strong foundation for a trust without equity but recognises there are no answers for the trust in Quebec. 44
Coming to a conclusive answer about whether civilian systems have a trust is not as easy as you would first think. Due to the unitary and absolute conception of ownership in civil systems, there is no separation of law and equity. Therefore, an English law trust which is characterised by these two levels of ownership is impossible in these systems. However, it evident that these mixed systems have recognised the convenience and versatility of property being held by one party on behalf and for the benefit of others. Roman law itself understood that this was a commercially attractive construction.Smith explained that “the trust has arisen, not one but many time and in many forms, exactly because people wished to accomplish lawful and licit goals that they could not accomplish through the use of contract or legal persons”. 45 Consequently, each mixed jurisdiction has found a way to introduce a “trust”. Scotland developed the dual patrimony theory which creates two separate groups of property owned by the trustee. Beneficiaries have a direct action against the trustee in relation to the trustee patrimony. SouthAfrica originally recognised the Roman fideicommissum but now consider that the truth is a unique and evolving construct. This blurring of the foundations and uncertainty as to the taxonomic place of trusts is also seen in Quebec. Smith makes clear that there is no consensus as to the nature of the trust, with many suggestions being half-explored or half-explained. What is evident, however, is that these different approaches serve the same end - to ensure that the “trust”can be used within each jurisdiction.
1 Law &Equity: Approaches in Roman Law and Common Law, E. Koops and W.J. Zwalve, Martinus Nijhoff Publishing, 2014
2 Ibid.
3 “…the rule adapts itself to the shape of the stone and is not rigid, and so too the decree is adapted to the facts.”
4 Maitland,(1909), p 10.
5 Ibid.
6 FirstReport of the Judicature Commission (1869))
7 S25(11)Judicaire Act 1873 / s49(1)(2) Senior Courts Act 1981
8 Armitage v. Nurse [1998]Ch. 241
9 Saunders v Vautier [1841] EWHC J82
10 Curtis vLukin [1842] 49 E.R. 533
11 Papinian, D.1.1.7.1
12 The EmperorConstantine to Bassus, Prefect of the City. C.1.14.1
13Johnston, D, Roman Law of Trusts, Published to Oxford Scholarship Online: March2012
14 Ibid. ft12
15Palmer VV, Mixed JurisdictionsWorldwide: The Third Legal Family,2nd edition, Cambridge UniversityPress. Online publication date: July 2012, Reid, E. Chapter 3 Scotland, p234
16Walker, D, “Equity in Scots Law” (1954) 66 Jurid. Rev. 103.
17Reid p234-5, Kames, Principles of Equity (5th edn., Edinburgh 1825), p.17.
18Reid p248, and Introduction to Scottish Legal History, An. (Stair Society) 1958 345, Morton, W. K. A Manual of the Law ofScotland. 1896
19Reid p249
20Fergus and G. Maher, “Sources of Law” in The Laws of Scotland: StairMemorial Encyclopaedia, Vol. 22 (Edinburgh 1987), para. 546.
21Reid p270
22Ibid.
23 Scottish Law Commission, Report on Trusts (SLC 329),p25, KGC Reid, “Patrimony not equity: The trust in Scotland” (2000) 8 EuropeanReview of Private Law 427
24Heritable Reversionary Co Ltd v Millar (1892) 19 R (HL) 43. The rule has since been put on a statutory footing in s 33(1)(b) of the Bankruptcy (Scotland) Act1985 / Sharp v Thomson [1995] SLT 837
25 Scottish Law Commission, Report on Trusts (SLC 329), p26
26 Palmer VV, Mixed Jurisdictions Worldwide: TheThird Legal Family, Van de merwe C.G., Du plessis J, De waal M, Zimmermann R,and Farlam van der merwe P., Chapter 2: The Republic of South Africa, p143
27Van de merwe et al, V.V. Palmer Mixed Jurisdictions Worldwide: The Third LegalFamily (Cambridge 2001), pp. 36–37
28 (1903) 20 SC 354, 366
29 Van de merwe etal p148
30 Sibanda,S., When Is the Past Not the Past? Reflections on Customary Law under SouthAfrica's Constitutional Dispensation, Human Rights Brief Volume 17 2010
31 Vande merwe p148
32 Ibid.
33 Vande merwe p199
34 1915 AD491
35 Van de merwe p199
36 1984 (2) SA 850 (A), Van de merwe p200
37 Ibid.
38 Ibid.
39 Palmer VV, Mixed Jurisdictions Worldwide: The Third LegalFamily,2nd edition, Cambridge University Press. Online publication date: July2012, McAuley M. Chapter 5 Quebec, p366
40CCQ-1991, Book I, Title I, a.6
41 McAuley M. p370
42 Smith, L, "Trust and Patrimony," Revuegénérale de droit (2008) 38 R.G.D., 398
43 Ibid. [399]
44 Ibid.
45 Ibid. [402]
