History of equity and trusts
The law of trusts was constructed as a part of "Equity", a body of principles that arose in the Courts of Chancery, which sought to correct the strictness of the common law. The trust was an addition to the law of property, in the situation where one person held legal title to property but the courts decided it was fair just or "equitable" that this person be compelled to use it for the benefit of another. This recognised as a split between legal and beneficial ownership: the legal owner was referred to as a "trustee" and the beneficial owner was the "beneficiary".
Roman precursors to trusts
had a well-developed concept analogous to the trust called fideicommissa. These were created by will and enabled a testator to leave property to one person who was obliged to hand it over to another. While they were much older they only began to create enforceable legal obligations around the time of the beginning of Roman Empire when Claudius charged the Consuls with enforcing fideicommissa, which were previously seen as merely morally binding. They had the advantage that whereas only the testator's heir could be charged with a legacy, legatees themselves could be charged with fideicommissa. They also allowed those would otherwise have been ineligible to inherit to inherit from the testator.These testamentary devices however, did not develop into the inter vivos trusts which apply the creator lives and would develop in England in the Middle Ages that created the basis for the modern English trust.
Medieval origins
Emergence of the Court of Chancery
The origin of the trust has to be traced to medieval England, where a distinction arose between the 'regular "course of the common law" ' and the practices and rulings that the Lord Chancellor gave. This notion of 'regular course' not only derived from Magna Carta, but would parenthetically become the broader idea of 'due process of law', but in its original conception it meant only that English subjects were entitled to be dealt and judged according to the English Common Law and that the King could not create new courts that contradicted or opposed the Common Law as developed in the courts of Exchequer, Common Pleas, and King's Bench.Despite this, the Kings were accepted to retain the right to administer justice in special cases where common law was 'deficient' and the matter in question did not involve 'life, limb or property'. The way this special grace was administered was through a petition to the King. Most of the petitions received no special redress but in some truly exceptional cases there would be some special treatment or dispensation which according to Sir John Baker, can be seen as 'the beginning of newer jurisdictions'. As the number of these petitions grew, it became common for the King to delegate addressing the petitions to either His Council or to a particular official most commonly, the Lord Chancellor. As it became usual to delegate the petitions to the Lord Chancellor it became common for petitioners to simply address the Lord Chancellor directly and not the King giving rise to the Court of Chancery. This process of petitioning the King also served to create other courts like the Court of Requests.
Medieval Lords Chancellor tended to be either senior clerics or experienced lawyers. Thus, when asked to deal with petitions asking for some special redress from the common law they did so from their own conscience, often drawing wisdom from Biblical or Philosophical conceptions of what was just in a particular case. It is important to remark that originally they were seen as merely addressing particular cases and could neither affect parties not named in the decrees the Chancellor gave nor change the law. These decrees 'enjoined' the parties to act in a particular way, giving rise to Equity's distinctive remedy: the Injunction. While the Common Law almost invariably awarded money damages, Equity was able to force defendants to act a particular way on penalty of being imprisoned for contempt court.
Before 1400, a lot of the petitions involved cases where a feudal superior abused their privileged position for which the plaintiff sought redress. Between 1400 and 1600 however, it is possible to detect a shift. The Chancellor still decided the cases solely on his conscience, but recourse to his court ceased being an exceptional matter and started to become more normal. Indeed, by 1579 it had become a busy court that was regularly sending away poor litigants, which would have been the staple of its earlier business, in order to address more substantial disputes.
Uses of land as direct precursors to trusts
Early history of the Use
According to common law there was only one person who said to have a right to land, which was the person entitled to seisin. However, the Lord Chancellor would hold that somebody was bound by good conscience to hold some land they had the right to ad opus alterius. At first, these nascent trusts were intended to be temporary. e.g. when a tenant by copyhold wanted to convey his land to another the procedure until 1925 was to surrender the land to the lord. He then held it for the benefit of the transferee until the lord admitted him as his feudal tenant.This holding of land for the benefit of another was found to be helpful when conveying land to those who were forbidden to own any. In particular, the Franciscans swore an oath of poverty that meant they could not own land directly. Furthermore, as Baker notes, Franciscan friars lacked the corporate personality that monks organised in abbeys and priories allowed them to own property through the abbey or priory. This oath of poverty, as confirmed by the papal bull Quo elongati, did not prevent them from enjoying the benefits of said land like rents and free accommodation. While a statute of 1391 prohibited the creation of uses for the benefit of religious corporations as these violated the several statutes of mortmain that gave the Crown oversight over donations of land to the Church. This was particularly important as the King had the right to charge a fee for issuing a licence that would allow a donor to gift land to the Church.
The Chancery's role in enforcing Uses
The Common Law, would not take notice of uses one effect of this as Baker notes, is that uses could be utilised to put land outside the reach of creditors. Another effect is that it left those entitled to the benefit of the land without recourse in the Common Law courts. Initially, uses would have been a mere matter of morality. It was only by appointing several notable local people, threatened with the shame of depriving another of their inheritance, that due execution of the use could be guaranteed.There are some evidences that there may be recourse in the Ecclesiastical courts, as they dealt with breaches of oaths. Furthermore, the Church courts had jurisdiction over wills. Indeed, as Baker notes in 1375, a group of feoffees were excommunicated for breaching the conditions of the use they were supposed to execute.
Uses were a matter of good conscience, it was the Court of Chancery, however, it was suited to pick up the mantle of enforcing the cestui que use
The 15th century, not only saw the work of the Chancery come to be characterised by the Use, but it began to give the Use some of the hallmarks of an interest in property. e.g.while it was still purely based on the conscience of the feoffee, where all of the feoffees died, the heir of the last one to die remained bound. Likewise, rules like that of Equity's darling, began to emerge in the 1450s. However, in early 1465, there was something that strongly resembles the modern resulting trust.
Early modern period
Henry VIII, fiscal feudalism and the Use
Wills of Land
By 1502, Frowyk CJ remarked that most English land was held subject to a use. The reason for this was that it enabled landowners to circumvent the Common Law's strict rules of succession. Under these rules land was not devisable by will but was instead always inherited by the heir-at-law. Uses, however, allowed for creative solutions e.g. those excluded by the rules, such as younger sons, daughters, illegitimate children could be provided for. Likewise, the provisions for widows could be enlarged and charities could be gifted to as well as debts paid off from land. This was achieved by a dying testator conveying land to feoffees, which could be friends, legal advisers or other local gentry, to the use of executing his will.Indeed, this practice of conveying to feoffees became so common that not only was it done shortly before death but it could be done long before during the life of the landowner, and the transfer simply to the use of the landowner. This still gave the landowner all the control he needed as the feoffees were obliged to execute his instruction both while alive but also by his will, since this interest under a use came to be seen as devisable legal interest under a will.
Purchasers of land however, often complained that they could be burdened by uses unknown to them. The Chancery would, consider them innocent if they were unaware of the use and had paid for the land, but this still required them to answer to a suit in Chancery, which could be cumbersome and expensive. Despite attempts in the late 15th century to resolve this, this complaint remained.
Fiscal feudalism
Furthermore, the use as a method of evading the feudal law of succession to land threatened the revenue of the Crown. Lords, particularly the Crown, had certain rights over their tenants' land sometimes called 'incidents of tenure'. Some of the most important were wardship and premier seisin. Under these doctrines, the Crown had the right to enjoy the profit of the tenant's land until he was of age and to select a suitable marriage for the ward, something that could involve a profitable transaction for the Crown as it was allowed to sell the right to marry a rich heir. Likewise, under premier seisin, the Crown could claim the profits of an heir's land for a year.These rights were an important source of income for the cash-short English monarchs. Henry VII and Henry VIII, who often faced increasingly expensive foreign wars, were determined to protect and increase their revenue from these rights as lord. Some scholars have called this phenomenon, "Fiscal Feudalism". In 1529, Henry VIII proposed a bill that would restore feudal incidents where land had been conveyed to the use of executing the landowners will but only at one third of the levels that the Common Law demanded. The House of Commons rejected the bill in 1531, at which point the King threatened that if they would not accept his proposal he would seek to enforce his feudal rights as far as the Law allowed. Within the circles of the King's legal advisers the view came to prevail that Uses of land were deceitful and thus were actually contrary to conscience to enforce. To this end, in 1532, Thomas Audley was made Lord Keeper of the Great Seal and Lord Chancellor the following year. Furthermore, the King's Secretary Thomas Cromwell was appointed Master of the Rolls in 1534.