COMMON LAW TRUSTS AND CIVIL LAW TRUSTS. THE HAGUE TRUST CONVENTION.
To what extent does the English trust, as a legal transplant, vary in Civil Law Jurisdictions, what are the main reasons for this, and how does the Hague Trusts Convention impact the process of transplanting the concept from one legal family
into the other?
Written by ELENA D. DOBREVA Supervised by SELMA DE GROOT
This thesis is submitted for the degree of LLM European Private Law at the University of Amsterdam 2019/2020.
ACKNOWLEDGEMENTS
I would like to thank my thesis supervisor Mrs. Selma de Groot for all her help and patience in guiding me throughout the process of completing this thesis.
ABSTRACT
This thesis explores the ongoing discussion on whether and how the English trust instrument as the Benchmark in the Law of Trusts is present in Civil Law jurisdictions which have not yet established the Law of Trusts as a separate field of Law, and the reasons for this. The thesis evaluates the successfulness of the English trust as a Legal Transplant from the Common Legal Family to the Civil Law Family on the basis of the similarities and differences between the form of the trust instruments in the two Legal Families. In Part 1 the thesis discusses the English trust, in Part 2 it discusses the Civil Law trust and juxtaposes the two concepts, subsequently. In Part 3, the thesis introduces the Hague Trusts Convention as the bridge between the two Legal Families for that it combines the similar features they posses, and remains silent on the differences. The thesis concludes that, as to its form, the English Trust instrument is not a successful transplant, because the research has come to find substantial differences between the Benchmark and the Variations in Civil Law Jurisdictions. The thesis recognizes the significance of the Hague Trusts Convention and its impact on encouraging Civil Law countries to introduce the instrument and recommends that more Civil Law jurisdictions shall become its signatories.
TABLE OF CONTENTS o Acknowledgements 2 o Abstract 3 o Introduction 5 o Aim 6 o RQ 7 o Method 7 o Structure 8
o Choice of Jurisdictions & Relevance 9
o Part 1. The Benchmark – The English Trust 11
o Introduction to the English Trust. Characteristics. Definition. Principles.
Functions. 11
o Origins of the English Trust. The Offspring of Equity. Maxims of Equity. 17
o Classification 25
o Part 2. The Civil Law Trust 29
o Introduction to the Trusts in Civil Legal Systems. Characteristics.
Definitions. Principles. Functions. 29
o Origins of the Civil Law Trusts or Transposition of the English Trust into
Civil Law. Relationship with Equity. 35
o Classification. Cariations in different Civil Law Jurisdictions. 39 o Part 3. The Bridge. The Hague Trusts Convention 41
o Importance of the Convention 41
o Definition of the “international trust.” Compatibility wih Common Law trusts
and Civil Law trusts. 43
o Impact of the Convention on the process of transplanting 47
o Conclusions & Recommendations 49
INTRODUCTION
Every comparative lawyer could agree on the core idea of legal families, that the diversity among world’s legal systems is not random.1 In other words, having knowledge of the two Legal Families established in Comparative Law - the Common Law family and the Civil Law family, we could allege that the jurisdictions forming part of each of them have similar intrinsic characteristics. For example, origin, sources of law, legal methods, style, and techniques, procedures and institutions.2 Over time, different aspects of legal systems have become part of the legal tradition of the legal family and, subsequently, have been conceptualised by the other legal systems in the family, for example during the times of colonial influence,3 or, alternatively, from one legal family to the other - introducing the term “Legal Transplant” which proved to be of crucial for the development, convergence and cooperation of all jurisdictions. Comparative Law is found to promulgate various definitions of the term, however, this thesis will stay with its original one, coined by Watson in 1974, which established it as the moving of a rule or a system of law from one country to another.4 Legal transplants are key for the operation of international law, too, as they presuppose transfer of rules and institution with a view of harmonisation between different jurisdictions on certain matters. This process, however, does not always prove to be an easy one. In order for a smooth transplantation to take place, the jurisdictions ought to be “ideologically and psychologically compatible.”5 But this raises the question of, whether and how rules, institutions, etc. could possibly be transferred from one legal family to the other,
1 Mathias Siems, Comparative Law 2nd edition (Cambirdge University Press 2019) p.50 2 Stefan Vogenauer, Sources of Law and Legal Method in Comparative Law, The Oxford Handbook of Comparative Law 1st edition (Oxford University Press 2006) p.873
3 n1 p.231
4 A. Watson, Legal Transplants (Edinburgh, Scottish Academic Press; Charlottesville, University Press of Virginia, 1974) p.1
having in mind what we have already established - that they divided on the basis of their general differences and incompatibility?
According to Pierre Legrand, research on this topic has been conducted by various scholars, and surprisingly their findings appear to have reached the same conclusion that, even if there is no incompatibility between the legal systems, the legal rule transplanted cannot survive the journey of transplantation and remain unchanged.6 Moreover, this statement, others argue that there is no transplantation without transformation.7 Therefore it cannot be said that, simply for the reason that a transplant is being introduced to a jurisdiction of the other Legal Family it is automatically render incompatible with its framework and impossible to be transplanted successfully.
AIM
This leads to the purpose of this thesis, which is, to examine the extent to which the English trust instrument, as the original trust instrument introduced to Law, has been successfully transplanted, in Civil Law jurisdictions, and the main reasons for this. Whether this instrument is a successful transplant will be evaluated on the basis of the extent to which trusts appear in civil legal systems identically. In other words, this thesis will examine and conclude on whether civil law trusts are identical as to their form to Common Law trusts. If they prove to be so, the civil law trust will be regarded as successful legal transplant.
From Comparative law perspective, this project has an explanatory aim. Meaning that it aims at juxtaposing the Law of Trusts in Common Law jurisdictions with the
6 Pierre Legrand, The Impossibility of Legal Tranplants, 4 Maastricht J. Eur. & Comp. L 111, 1997, p.117
7 Bruno Latour & Steve Woolgar, “Laboratory Life: The Construction of Scientific Facts” (2nd edn, 1986) 1, pp.38-39
one in Civil Law jurisdictions, stating the conceptual similarities, contrasting the differences and drawing up and explaining in the conclusion whether the Law of Trusts in Civil Law jurisdictions is a product of the English Equity, or the Law of Trusts in Civil Law jurisdictions is so different that the English Trusts Law, that there are not elements transplanted from the one legal family to the other.
RQ
The research question this thesis strives to answer is as follows: To what extent does the English trust, as a legal transplant, vary in Civil Law Jurisdictions, what are the main reasons for this, and how does the Hague Trusts Convention impact the process of transplanting the concept from one legal family into the other?
METHOD
The method used for conducting the research and presenting the findings refers to both functionalism and universalism. The reason for this is, that these two methods are complementing each other,8 and consequently will provide the reader with understanding from more than one perspective. The method of universalism, however, dominates for a number of reasons. The main is that, as all comparative lawyers know, functionalism requires substantial comparability - divergence - radicalism,9 which, as will be discussed further below, is not exactly the case here. The divide between the legal families in contract and property law, even though appreciable, is not that great to provide basis for a purely functional comparison. From the perspective of universalism, however, a fruitful analysis is to be conducted,
8 Michele Graziadei, The functionalist heritage. In P. Legrand & R. Munday (Eds.),
Comparative Legal Studies: Traditions and Transitions (pp. 100-128) (Cambridge University Press 2003) p.109
because the stress this thesis puts, is on comparing the form, more than the function of variations of the benchmark English trust. In other words, the connection between the different instruments has already, to some extent, been established, and discussing its truthfulness appears to be unnecessary.
STRUCTURE
The structure of this piece of work is - just like the structure of the trust, as it will be discussed below - tripartite. Meaning that the reader will encounter three separate parts on Common Law trusts, Civil Law trusts, and International Trusts, respectively. The reason for this choice of framework is essentially for providing the reader with the three perspectives of the Law of Trusts, on the one hand, and, on the other to allow the reader to distinguish clearly the characteristics of each trust instrument with a view to facilitate the subsequent contrast to be made. Moreover, what is intriguing about the framework this thesis is built upon, is the fact that the first two parts have been formulated according to the same structure, using the same algorithm. Each of the two parts will provide the reader with information as to the characteristics, definition, principles, functions, origins, and classification. Part 3 is dedicated to the Hague Convention, because after spending a sufficient amount of time reading documents from academics with both Common and civil law backgrounds, I have come to the conclusion that the only leverage, officially, there is today between the Common Law trust and the civil law trust as concepts, is this piece of legislation. This is also the reason why I have decided to name the part - The Bridge - between the two legal families. The significance of this document, although pivotal for the assimilation of the instrument by civil law countries, does not appear to be a transplant itself, but rather facilitates the transplantation process by providing a
general framework of the concept which appears to be compatible with jurisdictions from both legal families.
CHOICE OF JURISDICTIONS & RELEVANCE
Scholars like Siems argue that, on the one hand, there are fields of law, for example contract law and the law of torts, where transplantation of new elements is easier,10 as opposed to property law, for instance. Maybe by reason of the facilitate process by the general understanding of what is right and wrong with regards to contracts and torts. On the other hand, however, concept to be examined in this thesis is generally held to the “incompatible with the basic assumptions of Civil Law systems.”11 The reason for this is the fact that the Roman concept of ownership, which the Civil Law Family promotes, is that of dominium, i.e. a very inflexible notion that requires all the rights of a property to belong to one owner.12 Therefore, the divide which is essential for the operation of the English trust - between the legal and equitable owner of the property, cannot be found in a Civil Law jurisdiction.
This thesis will elaborate on the English Common Law of Trusts, and Equity first, because, as will become evident from Part1, this is where the traces of the instrument go back to. This is considered the first choice of jurisdiction and will later be referred to as “the Benchmark.” The second choice of jurisdiction is a combination of the different element of Civil Law jurisdictions. The reason for this is that the format of this project would not have allowed me, from the perspective of word limit, to conduct discussions on separate jurisdictions and reach a sufficiently concrete and persuasive conclusions. Moreover, if only one Civil Law jurisdiction has been
10 n1 p.68
11 Maurizio Lupoi, The Civil Law Trust, 32 Vand. J. Transnat’l L. 967 (1999) p.967 12 J E Penner, The Law of Trusts 9th edn (Oxford University press 2014) 2.86
chosen for this research, this, too, would not have been able to contribute to a fruitful analysis, because different jurisdictions, as it will be discussed further in Part2, have different approaches towards the concept, and have incorporated in into their national laws differently.
As discussed in the previous subchapter The Hague Trusts Convention, also forms part of this thesis, for a couple of reasons. Most importantly - for the fact that it becomes the bridge between Common law and Civil law jurisdictions, its role is vital for encouraging Civil Law jurisdictions to adopt the instrument.
PART 1 THE BENCHMARK - THE ENGLISH TRUST
1.1 Introduction to the English Trust. Characteristics. Definition. Principles. Functions.
As established in the previous introductory part, the purpose of this thesis is to examine the extent to which the English trust instrument, as the original trust instrument introduced to Law, has been successfully transplanted, in Civil Law jurisdictions, by making a comparison between what constitutes a trust in Common and civil law, respectively. The English trust instrument has been taken as the benchmark, therefore this part will be entirely dedicated to explaining how and why it was brought about, and how it has developed to be what it is today.
The purpose of this part is to define the original trust instrument, its general principles and the key features needed for conducting the conceptual analysis. The part also strives to enable the reader to trace to the origins of the trust instrument - the process of inventing it by Equity, its predecessor - the use, the leverage with the maxims of Equity - and compare it to its position nowadays. Moreover it will briefly distinguish between the different types of trusts under English law. The part will be concluded with a short summary on the nature of the English trust to provide us with sufficient basis for comparison with what Civil Law jurisdictions refer to as a trust. We shall begin with taking a closer look at defining the trust as a concept in law. The most important feature of the English trust instrument is its tripartite structure. It is the cornerstone of the fiduciary duties arising out of it. The historical background of the English trust can be traced back to the medieval property device “the use.”13 This device could be considered as an forerunner14 of what we call a trust today, mostly
13 n12, 1.18
due to its similar tripartite structure.15 The “use” goes back to the thirteenth century when it was “used” to conveyance of land in order to avoid potential liabilities or restrictions on inherited property.16 It is often considered the ancestor, because it resembles its structure, but the only trust assets that could have been held by the use were lands, in contrast to today’s trusts, where a variety of possessions could form the subject matter.
Defining the trust in general is a challenging task, that many scholars and judges had their thoughts on, and it can certainly be done in different ways.17 In the following paragraphs a few points of view will be presented.
One of the most detailed and helpful definitions is considered to be the one provided by Frederic Maitland in 1936, which discusses it in the following context:
“When a person has rights which he is bound to exercise upon behalf of another or for the accomplishment of some particular purpose, he is said to have those rights in trust for that other or for that purpose and he is called a trustee.”18
This definition gives a very good outline of the concept as it clearly states that, on the one hand, the trust instrument conveys power to exercise certain rights to a specified person - the trustee, and on the other hand - that it also imposes obligation on him to exercise this power in order to perform a specific task, or reach a specific goal. Maitland’s definition could be summarised by saying that it is composed of two essential elements.19 The first one is proprietary - it represents that one person holds the property for another, or for a particular purpose. The second one is obligatory and defines the boundaries imposed by Equity. The boundaries in this context have
15 Milsom, Historical Foundations of the Common Law, 2nd edn (London: Butterworths, 1981) Ch 9
16 Moffat, Trust Law, 6th edn, ed. Garton (Cambridge: Cambridge University Press, 2015) Ch 2 17 W G Hart, “What is a trust?” (1899) 15 LQR 294, p.8
18 F. W. Maitland, Equity: A Course of Lectures, 2nd edn, ed. Brunyate (Cambridge: Cambridge University Press, 1936) p.44
a dual purpose. They are imposed upon the trustee, on the one hand, with regard to defining the rights they are conferred by the trust. On the other hand, with regard to defining their obligations, in proportion with the equitable rights of the beneficiary. These two elements – proprietary and obligatory - have been recognised as having great significance in defining the trust by other scholars, too, e.g. Parkinson.20 They have also been considered to provide a clearer understanding when distinguishing trusts from other legal concepts, e.g. contract or gift. As Graham Virgo explains, the significance of the proprietary element is unquestionable,21 as it represents the essence of the trust as an instrument. The obligatory element’s necessity, however, has been more and more argued over in recent times. There are scholars like Parkinson and Langbein, who strongly emphasise on the importance of obligations conferred on trustees by the trust instrument, and even suggesting that there is a “contractarian account”22 of the trust, which essentially equates the function and form of the instrument with bargaining, being called a “trust deal.”23
Langbein’s definition and understanding of the trust are phenomenal, and deserve a closer look. It can be said that he is one of the first scholars to discover the hybridity of the English trust, i.e. the fact that it encompasses both contract and property law rules. Langbein explains that the instrument “straddles” the two fields of law, because it governs contracts for deploying property.24 Despite that Langbein's approach towards the trusts is undoubtedly interesting and innovative for its time, due to its “hybridity” characterisation, it comes with some essential contradictions. Firstly, it is the tripartite structure - settlor, trustee, and beneficiary. In contrast to the rights and obligation stemming from a contract, where, a party gives something,
20 Patrick Parkinson, “Reconceptualising the express trust” (2002) 61 CLJ 657, p.683 21 n14, 3.2
22 John H. Langbein, “The contractarian basis of the law of trusts” (1995) 105 Yale LJ p.625 23 ibid
does something, or pays something in order to obtain rights, goods, etc in exchange, in trusts the settlor is the giver, but not the recipient. The recipient is a third party, which is not involved in the initial phase of giving. Secondly, the settlor, despite of what he puts on trust, does not have any rights over the property whatsoever, the trustee does (except for the situation where he expressly reserves rights to revoke or amend the trust,25 appoint trustee, or advise them26). Thirdly, the settlor is in a position to create a trust where he is the trustee, as it will be discussed below. In such situation, no contractual relationship can be found, as the fiduciary power is vested in one and the same person.
Langbein's position of identifying the trust instrument can be described as innovative, however, not universal. The reason for this consideration is that, the law of trusts is simply a body of default rules, which can either be followed by the settlor when creating the trust, or rejected by him,27 rather than a form of contract, or other conveyance document with strong contractual features. In other words, this definition of trusts might be wide enough to encompass a various number of trusts, but certainly not all trusts known to English Law. Also, although the contractarian definition given on the basis of the obligatory element does not stand for all types of trusts, the two-element-division seems to provide a very clear understanding of both the position of the 3 entities, and the property, and their rights and obligations.
Another thing which is essential for the proper assessment of the trust is the understanding of whether and when a trust shall be recognised as binding. This is generally decided upon four general principles, established in a judgment in 1996 by Lord Browne-Wilkinson.28 In this judgment, the Lord found that there are four
25 Choithram International SA v Pagarani [2002] 1 WLR, 1, 11 26 Vestey’s Executors v IRC [1949] 1 All ER 1108
27 n14, 3.2
uncontroversial grounds on which the court shall determine whether a trust arose in the given circumstances, which are as follows: first - conscience, second - the facts that may affect it, third and fourth - whether those facts affect the identifiable property and equitable proprietary interest.29 The importance of these principles has not been compared and contrasted, however, they all need to be satisfied for the court to recognise such a fiduciary relationship as a trust under English Law.
There is a variety of reasons why trusts have become such an important part of contemporary law. From a legal perspective, the significance of the instrument can be evaluated in the light of the functions it serves. Although different scholars and judges’ opinions often depart from one another, there are a few points which tend to make a convergence. The following paragraph will give a brief description of the main functions of the English trust.
The first and, in my opinion the most important function of the trust instrument is the ability it gives to the settlor to divide the asset of his estate - the trust property from the rest of his estate, in order to safeguard it. In other words, the trust shields the trust property from an event of insolvency, and ensures that the beneficiary would not be deprived from enjoying it. The second function is management and administration of the trust property. This refers to the duties of trustees and their experience - judgment and knowledge - financial and investment,30 which obliges them as such to perform fiduciary obligations towards the beneficiaries to the standard of a “prudent man of business.31 The third function is concerned with the convenience the trust instrument offers. This means that it is often used to hold property on behalf of a certain group of people who have something in Common
29 n14, 3.2 30 n12, 10.32
which relates them to the trust property, for example pension fund trusts.32 The last function of trusts to be discussed in this paper is tax-related. This does not mean that such an instrument can be used as a mechanism to evade or avoid tax which is already due,33 but rather that the trust can be considered as creating impetus for the legitimate reduction of tax liability, as observed in IRC v Duke of Westminster (1936).34 In the commercial world, where tax is very carefully considered in every transaction, such an instrument proves to be very useful. However, the benefits it may confer would be considered abusive if the main or one of the main of its purposes is to avoid tax.35 In such situations the General Anti-Avoidance Rule would apply and tax liability would be imposed.36
To finish this introductory part, we shall summarise the information discussed as follows: defining the concept of “trust” is an intriguing and compelling task and this part has discussed that today’s definition derives from what was previously knowns as the “use”, and elaborates further on its evolving by pointing out important considerations by Maitland, Parkinson and Langbein. Moreover, this part outlines the four general principles, as established by Lord Browne-Wilkinson. Furthermore, the last paragraph describes and explains the different functions which the trust may serve. All of the information that has been presented and discussed up to now refers to trusts in general. Here, it shall be noted that there are different types, or - categories, of trusts. This aspect of the law of trusts will be discussed in the following part. The following chapter will focus on the historical aspect by discussing the how trust were brought about, and their relationship with Equity.
32 Lord Millett, “Pension schemes and the law of trusts: the tail wagging the dog?” (2000) 14 TLI 66, p.74
33 IRC v Willoughby [1997] 1 WLR 1071, 1079 per Lord Nolan 34 IRC v Duke of Westminster [1936] AC 1, 19 per Lord Tomlin 35 n2, 3.4.5
1.2
Origins of the English Trust. The offspring of Equity. Maxims of Equity.The original trust instrument was brought about by Equity. It is still considered to be one of its most important developments,37 and its most important contribution to English law as a whole.38 Knowledge and understanding of Equity among Common lawyers is very “Common”, however, civil lawyers might find it difficult to understand why 2 parallel judicial systems used to exist in England back in the day.
Departing from the Common understanding, the term “equity” does not contradict “Common Law” as they are both judge-made, therefore they are both “creations of Common Law.”39 For a clearer explanation, there is a need to go back to the Middle Ages, as this was the point in time when judge-made law initiated its rapid development.40 Before there was a division between Equity and Common Law, enforcement of law in the English legal system was done via a writ system. The writ system which was spread throughout the Kingdom was very rigid and strict as to what qualifies to be heard by the judges and the jury. The system supposed that in order for the plaintiff to prove their rights against the defendant, their claim must be de verbo in verbum with what is established as the relevant writ, and “must not depart in the least detail.”41
Moreover, the general attitude of judges towards the claims brought while the writ system operated, was often considered as inflexible and onerous. Additionally, claimants used to bear a burden of extremely strict rules as to pleading and proof.42 Overall, Common Law was classified as very restrictive, with very little discretion involved in the process, therefore something had to be done in order to remedy this
37 n12, 1.17 38 n14, 1.4.7 39 n12, 1.2
40 J. H. Baker, Introduction to Legal History, 4th edn (Oxford University Press 2002) pp.97-116 41 Alan Harding, The Courts of Medieval England (Routledge 1973) pp.18, 28-29
onerosity and give claimants the ability to seek justice and obtain redress in cases falling outside of the scope of writs. This is when certain power was delegated to the Lord Chancellor by the King, in order to fulfil this function, and the notion of Equity has been established.
“Equity is a roguish thing: for law we have a measure, know what to trust to; equity is according to the conscience of him that is chancellor, and as that is larger or narrower, so is equity. [It is] as if they should make the standard for the measure we call a foot a chancellor’s foot; what an uncertain measure would this be! Once chancellor has a long foot, another a short foot, a third an indifferent foot.’ Tis the same in the chancellor’s conscience.”43
This quote represents the nature of Equity and the strong position the Lord Chancellor has in it. The figure of the Lord Chancellor, as the chief minister to the King, has often been connected with his conscience, this is the main reason why he was initially entrusted with the task. His conscience gave him the ability to hear the claims and adjudicate with fairness and justice. However, this discretion also has a negative aspect. As discussed by John Selden, the flexibility as opposed to Common Law, might have led to unfairness and injustice, too, considering that the conscience of the Lord Chancellor differs from this of the parties and for example, from the conscience of other Lord Chancellors.
The famous Greek philosopher Aristotle, back in his day, also has pointed out the significance of the notion of Equity in society as a whole. He believed that “it is equity to pardon the human failing, to look at the law giver and not to the law, to the spirit and not to the letter, to the intention and not to the action.”44 It seems clear the the
43 Table Talk of John Selden, ed. Pollock (London: Selden Society, 1927) p.43
44 Aristotle on Equity or Epieikeia, <https://sniggle.net/TPL/index5.php?entry=20Oct09> accessed on May 1, 2020
role Equity plays in a society in major, and its contribution to fairness and justice is compelling.
Accordingly, Common Law and Equity continued to exist in parallel, despite of the different approaches they took towards claims - the former looking to the letter, and the latter looking to spirit. It was not until the decision of Earl of Oxford’s case45 that the position of equity was officially crystallised. In this case, the approaches of Equity and Common law towards the matter clashed, and Equity prevailed. It was then established - the sole purpose of equity was to “soften and mollify the extremity of the law.”46 Although equity did not form part of Common Law, there was a moral virtue aimed to qualify, moderate and reform the edges of the law.47
The existence of parallel judicial systems continued until the late 19th century, when the Judicature acts of 187348 and 187549 were established, which effect was to abolish the Chancery courts where Equity claims were heard and fuse the judicial systems in the High Court.50 Consequently, the contemporary position of the judicial systems is that they are more complementary, rather than contradictory. However, the extent to which rules and principles have been “fused” into one coherent body of law remains open.51
After making this comparison and drawing this contrast between Common Law and Equity, I believe a question raises. Why is this so important to the discussion? How is the notion of equity related to the Law of Trust or to the other legal systems that are to be examined in the following chapters? The direct influence of Equity on the development and operation of the law of trusts is found in shaping the position of the
45 Earl of Oxford's case (1615) 21 ER 485 46 Ibid
47 Lord Dudley v Lady Dudley (1705) Prec Ch 241, 244 48 Judicature Act 1873
49 Judicature Act 1875 50 n2, 1.3
trustee and the beneficiary. In other words, the trust relationship between these two parties is essentially based on equitable principles – or, alternatively – the original 14 maxims of Equity.
As Professor Ashburner once established, unlike in Civil Law countries, in the English system there are two streams of jurisdiction in the face of equity and Common Law, and, although they run in the same channel, side by side, they do not mingle their waters.52 For the purpose of ensuring the operation of equitable jurisdiction within the “channel” equity is governed by fourteen maxims.53 Although they all take part in the operation of trusts, some of them appear to be of greater signifance compared to others. The fourteen maxims would be discussed below, on the basis of their significance to trusts, paying more attention to the ones responsible for its establishment, government, recognition, and enforcement.
(1) Equity is discretionary.
Equity consists of strictly applied, identifiable rules, it could be characterised as doctrinal,54 and doctrines are “progressive, refined, and improved.”55 The explanation of this maxim fully resembles the characteristics of the trust. Therefore it oculd be considered pivotal.
(2) Equity is triggered by unconscionability.
This can also be said the other way around - Equity operates on the conscience of the owner of the legal interest,56 meaning that the unconscionability of the defendant
52 Gary Watt, Trusts & Equity 9th edn (Oxford University Press 2020) p.13 53 n2, 2.1
54 n2, 2.2
55 Re Hallett’s Estate (1880) 13 Ch D 696, 710
is what initiates when Equity is to interfere, or said in other, more precise words - the defendant’s “contrary to good conscience” actions.57
(3) Those who seek Equity must do Equity
This maxim represents the reciprocity of the process. For a claimant to be granted any equitable remedy, the court examines whether he is willing to act fairly towards the defendant in the future,58 and retains the right to deny doing so if it finds that he does not.59 This does not appear to have a direct influence to trusts.
(4) Those who come to Equity must come with clean hands
The fourth maxim, this one is concerned with the past impropriety of the claimant.60 Consequently, if the court finds that the claimant does not have “clean hands” equitable remedy may be denied.61 This might play a role in recognition of the trust. (5) Equity treats as done what ought to be done
This maxim is of particular importance to the law of trusts, and especially when it comes to going after one’s property, which is held on a trust. The notion of the maxim could easily be illustrated by the situation where A agrees to transfer property to B, and later decides he no longer wants to do so. In the eyes of Common Law, A will still be the owner, however, Equity would entitle B to equitable ownership of this property.62 This maxim is of great importance to trusts, as it shapes the position of the benficiary’s equitable interest and the trustee’s legal interest.
(6) Equity protects the weak and vulnerable
57 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51
58 n2, 2.4
59 Chappel v Times Newspapers Ltd [1975] 1 WLR 482
60 Zechariah Chafee Jr., “Coming into Equity with clean hands” (1949) 47 Mich L Rev 877, p.1065
61 Fitzroy v Twilim (1786) 1 TR 153 62 Rayner v Preston (1881) 18 Ch D 1
This maxim is also very important for the trust instrument. For example, there are many trusts settled for underaged kids, who will be entitled to the benefits when they reach a certain age, a.k.a are no longer in a weak or vulnerable position, in which they might become a victim of exploitation, e.g. undue influence etc.63 Equity aims at protecting the weak and vulnerable in relation to inequality of bargaining power, or other disabilities the parties might have.64 This maxim, too, is essential for trusts, as it presuposes the protection of the beneficiary’s interest.
(7) Equity is cynical
The wording of this maxim might sound confusing as the literal definition of the word “cynical” is “distrustful”65 and yet it still forms part of equity’s operation and the existence of the trust. The leverage here is that, what is meant by this maxim is that a lot is required from fiduciaries due to the presumption that people having such powers – i.e. the trustees may be tempted to exercise them to their own benefit, rather than the beneficiaries’.66 Consequently, any profit made in this course renders the former liable to direct it to the latter – i.e. the beneficiaries.67
(8) Equity is imaginative
This maxim refers to the flexibility of Equity which comes to “mollify”68 the law, and its “rigid and unimaginative application.”69 In the same manner, contrast is made between the discretion of the trust as an instrument for conveyance and contracts. (9) Equity follows the Law
This is, in my opinion, the of greatest importance for the operation of equity and, consequently, trusts, because this is the leverage between it and the modern world.
63 n2, 2.7
64 Cresswell v Potter [1978] 1 WLR 255n 65 Cambridge Dictionary
66 n2, 2.8
67 Boardman v Phipps [1967] 2 AC 46 68 Earl of Oxford's case (1615) 21 ER 485 69 n2, 2.9
Despite that Equity strives for what is right, beyond the rules, it always follows the law, in the sense that it does not contradict it manifestly. However, the notion of this maxim is often interpreted ambiguously. On the one hand, it refers to the discretion and flexibility, which Equity aims to provide in order to ensure the fair and just application of the black-lettered law. More specifically, it implies that Equity is able to do so only within the boundaries of Common Law, as it recognises the legal rules, norms, and entities of law. On the other hand, equity is said to follow the law, but “not slavishly, nor always”70 retaining its discretion and flexibility to an extent.
(10) Equity looks to substance rather than to form
Equity’s aim is to reflect the intentions of the parties, and would trigger rectification if the wording of a trust does not resemble the intention of the settlor.71 In other words, Equity will consider it inequitable to allow a person insist on a form which does not correspond to the substance, and therefore, defeats it.72 The maxim’s significance for understanding trusts is found in that it characterises its most important feature, which distinguishes it from other Common Law legal concepts - the shield Equity confers to protect the equitable owner, who in the eyes of the law does not hold the property (in form), however in substance he seems to do so.
(11) Equity will not assist a volunteer
Also known as “Equity will not perfect an imperfect gift.”73 It essentially means that a volunteer, being the person providing for the transaction, e.g the donee,74 will not be assisted by Equity to make the transaction legal if it is not already legal under Common Law.
(12) Equity assists the diligent
70 Graf v Hope Building Corp (1920) 254 NY 1,9 per Cardozo J 71 The Olympic Pride [1980] 2 Lloyds Rep 67
72 Parkin v Thorold (1952) 16 Beav 59,66
73 Milroy v Lord (1862) 4 De GF & J 264, 45 ER 1185 74 n2, 2.12
If there is delay in seeking an equitable remedy, his claim for such may be refused, even if there is not a time bar.75
(13) Equity is equality
Equality provided for by Equity could be found in numerous aspects of a trust. For example, if there are equitable interests in one’s property - they are treated as equal, or, if trustees are appointed to discharge trust property for a charitable and a non-charitable, they are implicitly expected to do so equally.76 It is important to note, that it is not “mathematical equality” what we speak of, but rather “proportionate equality.”77
(14) Equity acts in personam
This last maxim often leads to controversy. It distinguishes rights in rem and rights in personam, emphasising that Equity focuses not on whether a person is entitled to proprietary rights, like Common Law, but rather on whether the person has personal rights to use the property.78 This maxim applies to trust, too, because literally trustees have the legal ownership, however, they are not entitled to “use” the property, but rather usually to hold it for the beneficiary.
The purpose of this chapter was to discuss the origin of the trust instrument – Equity as the second stream in the jurisdictional channel of English Legal System, as opposed to Common Law. After this being done, the following chapter will emphasise on the classification of the different English trusts and will try to summarise the most essential aspects of their application.
75 ibid 2.13 76 ibid 2.14
77 Re Steel [1979] Ch 218 per Megarry V-C 78 n2, 2.15
1.3 Classification
The final remark to be done in this part is to distinguishing between different types of trusts and what briefly outlining the purposes they serve. The reason for including this subchapter is in order tot race whether the same categories of trusts appear in both Common and Civil Law. As it will be discussed in the following parts of this thesis, unlike Civil Legal Systems, in the English Legal System there is a number of different types of trusts.
The first thing to be considered is how trusts are classified, i.e. on what grounds. Despite the numerous theories found in law books, distinguishing one concept from another, this piece of work will only elaborate on two grounds of differentiating - by event and by context.
Classifying trusts by event is a methodology established by Birks, in which he distinguishes 4 types of trusts in the basis of the events that had triggered them: consent, wrongdoing, unjust enrichment and other events.79 This theory has been given some credit, but subsequently regarded as unhelpful at best, and at worst - distorting our understandings about what trust arises when.80
The other possible way for distinguishing between different types of trusts is based on the identity of trust, i.e. on the context in which it is made. Essentially, distinguish is made on the basis of specific characteristics of the trust, consequently to be classified into eleven categories, which are not mutually exclusive.81
79 P Birks, “Equity in the modern law: an exercise in taxonomy” (1996) Univ WALR 1, p.9 80 n 2, 3.6.1
81 Nicholas McBride: "On the classification of trusts,” in Restitution and Equity), Vol. 1: Resulting trusts and Equitable compensation, ed Birks and Rose (Oxford: Mansfield Press 2000) p. 24
The first category, which is also the main category, is express trust. This category supposes that the trust is set up intentionally,82 i.e. via express trusts, the settlor, either orally or in writing shall express his intentions.83
The second category, which is also very very Common is Fixed trusts. A trust falls within this category if expressly states what interest the beneficiary is entitled to. The definition is quite simple, however, some scholar have also suggested that fixed are all trusts which are not discretionary.84
The third category is the opposite of fixed trusts - discretionary trusts. Essentially, via a discretionary trust, the trustees obtain powers to distribute the trust assets as they see fit, and, accordingly, the beneficiaries do not have equitable interests in those assets, but merely a hope that the decision of the trustee would be in their favour.85 Discretionary trusts tend to be more complicated for the trustees, especially when it comes to a large number of beneficiaries, some of which need to be ascertained by the them, as observed in Re Baden's case.86
The fourth and fifth categories refer to the state of the settlor. Inter vivos trusts and testamentary trusts refer to circumstances where the settlor is still alive, and where he, in his will, left the assets on a trust, respectively.
The sixth category refers to the relationship between the trustee and the beneficiary - bare trust, which is opposite to active trusts.87 This category supposes that the trustee shall have neither discretion in administration of the assets, nor any active duties, and shall be bound to the beneficiary’s decisions.88
82 Pankhania v Chandegra [2012] EWCA Civ 1438 per Mummery LJ 83 n12, 2.2
84 n12, 3.4 85 n14, 3.6.2 (iii)
86 Re Baden's Deed Trusts (No 2) [1972] EWCA Civ 10 87 Saunders v Vautier [1841] EWHC J82
The seventh category distinguishes between private and public trusts. Public trusts are created in order to bring benefit to the public,89 and private trusts are “trusts for people.”90
The eight category is protective trusts, which is a means for protecting the beneficiary from bankruptcy.91
The ninth category is pensions fund trusts, which greatly differ from the general idea of trusts as they motivated employment and remuneration, rather than personal relationships like family or friendship.92
The final two categories are of great importance to this research, the reason for this is that they form what is called implied trusts, which covers a major area of the law of trusts. On the one hand, resulting trusts trace back to the “uses" we discussed previously in this part, and are characterised by the fact that the settlor and the beneficiary are the same person, therefore the assets ”result” back to their legal owner.93 On the other hand, constructive trusts are trigger on specific events, e.g. unconscionability,94 or are imposed by the operation of law or the equitable maxims, e.g. “equity looks upon that as done which ought to be done.”95
To summarise this chapter, the most Common ways to categorise a trust are two, however the courts are only keen to apply the McBride's one, as it meets certain standards, the importance of which is significant for the parties. It shall be noted that all of the different categories of the trust instrument identified in this chapter are essential for the assessment of the topic discussed in this thesis. A further comparison and contrasting which will be conducted in the following parts aims at
89 Re Compton [1945] Ch 123 90 n14, 3.6.2 (vii)
91 L. A. Sheridan, “Protective trusts" (1957) 21 Conv 110
92 Graham Moffatt, “Pension funds: a fragmentation of trust law?” (1993) 56 MLR 471, 488 93 Re Vandervell (No 2) [1974] Ch 269, 289 per Megarry J
94 Keech v Sandford [1726] EWHC J76 95 Mountney v Treharne | [2002] 3 WLR 1760
elaborating within the same framework. Classification of the trust instrument allows the reader to easily spot the similarities and differences which appear in the two legal families with regards the instrument and facilitates its understanding as a tool in the legal world.
PART 2 THE CIVIL LAW TRUST
2.1 Introduction to the Trusts in Civil Legal Systems. Characteristics. Definition. Principles. Functions.
The purpose of this part is to examine how and to what extent the concept of trusts is present in Civil Legal Systems. More specifically, this part aims at going through the same algorithm, observed in Part1 as much as this is possible. The first chapter will identify the characteristics, definition, principles and functions of the civil law trusts, will and compare and contrast the findings with what was previously discussed in relevance to the benchmark English trust. The second chapter will look into the question of whether trusts were transposed from Common Law into Civil Law jurisdictions, or there is another origin of trusts, specifically to the understanding of the civil law concept. It will also discuss the potential relationship Civil Law trusts have with Equity, for instance – whether they share any similar functions. It is famously known that Equity does not form a distinct part of the Civil Legal systems. Although the algorythm established in the previous part served the purpose of this thesis very well, this part will slightly deviate from this structure, in order to provide a framework fully compatible with Civil Law. The reason for this is essentially that the trust as we know it, does not form part in its entirety in Civil Law countries, in the way it does in Common Law countries. A great part of Part 1 has been dedicated to the role of Equity in the development and operation of the Common Law trust. However, as we will observe further in the following paragraphs, the concept of trusts in Civil Legal System, is reconsidered. This means that the traditional Common Law perspective of the trust as being equally concerned with proprietary and personal rights and obligations has been adopted and adapted as being less about proprietary than it is about personal rights and obligations.
The third chapter will be divided into two subchapters. The first one aims at discussing the different types of trusts there are in Civil Law jurisdictions, and whether there is any resemblance between Civil and Common law trust types. The second subchapter will briefly outline the way different jurisdictions approach the concept of trusts in general – the different names they give to the instrument, and its Common understanding among the national jurists.
The part will be concluded by a summary of the ways in which Civil Law trusts varies from Common Law trust. It will also try to identify the reasons for this variation. This final chapter will also discuss on the successfulness of trusts as legal transplants, as regards their function and form. This means that this discussion will be considering not only instruments which fully resemble the characteristics, definition (form), but also substitutes with which the benchmark shares Common principles and functions (function).
Commencing this part by discussing the characteristics and definition of the civil law trusts might be confusing, regarding the fact that it is generally assumed that trusts are “incompatible with the basic assumptions of civil law systems.”96 Civil Law systems often regard the trust instrument as foreign to the jurisdictional framework, and have a skeptical view towards its transplantation, because of its “lack of formality”97 and unfamiliar property form. To remedy this skepticism, numerous scholars working in this field suggest and support the view that the introduction of trusts to Civil jurisdictions shall require “not only translation of Common-law rules into civil-law concepts but also a precise choice about the functions to be performed by
96 n11, p.967
97 Angelique Devaux, DeAnna Beckner Margaret Ryznar, “The Trust as more than a Common Law Creature”, 41 Ohio N.U.L Rev. 91, p.1
these instruments.”98 Although this presupposes either a very Common understanding, or misunderstanding of trusts, they are present in civil law jurisdiction, either in their benchmark entirety - meaning resembling the English Common-law trust, or, alternatively - in the form of “trust-like devices,” often referred to by legislation as “analogous devices.”99 Therefore, defining trusts as instruments, with reference to their form, specifically in relation to civil law jurisdictions appears to be unnecessary. As Cantin Cumyn found, in her work on characterisation of Civil Law trusts - “the idea that each country has of the fudicie or of the trust is shaped by more or less internal factors.”100 Otherwise said, often countries have an internal approach towards sunch instruments which have not been introduced to the jurisdiction, yet. Another argument supporting this point would be the fact that different jurisdictions with civil character, define and characterise trusts differently. The starting point is evident from linguistic perspective, as discussed by Lupoi. For instance, as it will be discussed in greated detail further in Part3, if we took text from the Hague Convention on the Law Applicable to Trusts and on their Recognition, and subsequently the translation into its signatories’ languages, we could have concluded that there is a slight deviation from the meaning of the wording of the original document, which is enacted in English.In other words, in French, as the official language of one of the signatories - Monaco, Article 2 of the Convention which defines the trusts is translated as follows:
98 Andrea Vicari, “A new type of civil-law trust. The theory behind San Marino Trust Law”, Novermber 2014 p.3, <www.step.org/journal> accessed June 1, 2020
99 Adair Dyer & Hans van Loon, “Report on Trusts and Analogous Institutions” (Hague Conference on Private Int’l Law ed., 1982) p.173
100 M Cantin Cumyn “Pourquoi définir la fudicie comme un patrimoine d’affectation? in Cross-Examining Private Law (2008) p.9
le terme « trust » vise les relations juridiques créées par une personne, le constituant - par acte entre vifs ou à cause de mort - lorsque des biens ont été placés sous le contrôle d'un trustee dans l'intérêt d'un bénéficiaire ou dans un but déterminé.
Le trust présente les caractéristiques suivantes :
a) les biens du trust constituent une masse distincte et ne font pas partie du patrimoine du trustee;101
It becomes evident that the French – Monacian to be precise - translation, more specifically point a) presupposses that trust assets are transferred to a separate fund, than the trustee’s patrimony, which is not what the original text in English supposed to establish. However, this is just an example of definition lost in translation, further discussion on the Hague Convention will be elaborated on in the Part 3 of this thesis.
In order to go in greater detail, we shall first state that, in comparison to Common Law principles with regards to estate, in civil law there is patrimonium - a person’s “economic personality”102 and every person is entitled to have only one. For the purpose of defining civil law trusts we shall compare and contrast their characteristics against the findings of Fratcher with regards to trusts in comparative aspect. He established that a trust is a legal device, whereby the ownership of the trust property is split.,103 the idea in modern theory, however, is highly contested. Contrary to this statement which represent the the view of a Common lawyer, civilians’ methodology with respect to the patrimonum speaks of inability to make a
101 Hague Convention on the Law Applicable to Trusts and on their Recognition, Article 2 102 n12, 2.88
103 William F Fratcher, International Encyclopaedia of Comparative Law (1973) Vol 6, ch 11 para 1
distinction between benefits and liabilities, and inseparability of equitable and legal title respectively.104
Going further into the characteristics of civil law trusts we could say that, despite the fact that different jurisdictions approach the issue of transplanting the trust instrument differently, there are two general frameworks which are worth of explaining here, these are the two most Common approaches civil law jurisdictions take towards trusts.105
The first framewrok is found in the Quebec version of trusts, which is characterised as forming a separate patrimony from the patrimonies of the 3 parties to the trust, i.e. a “patrimony by appropriation, autonomous and distinct from …”106 Essentially, for a Common lawyer this would make no sense, as it literally states that the trust assets are ownerless. Morevover, it appears to be difficult to understand from a civilians’ perspective, which follow the second framework. This, however, appears to be problematic and presumes difficulty only theoretically.107 In practice, this difficulty is resolved on the basis of operation of discretionary trusts. In the Common-law discretionary trusts the beneficiaries, too, do not have equitable rights of the assets, but neither does the trustee. However, once the execution of the trust begins, they are conferred (upon the trustee’s conscience) the assets, which add up to their estate.
The conclude this Quebec’s approach of trust, we shall agree on the fact that even though the form is different, with respect to the ownerless assets, the result appears to be the same. In other words, even if the form is considered to be departing from let us say fixed trust, but is, however, similar to the form of discretionary trusts, the
104 James Sheedy, “Civil Law Jurisdictions and the English Trust Idea: Lost In Translation?”, 20 Denning Law Journal 173 (2008) p.175
105 n12, 2.86
106 Quebec Civil Code, s.1261 107 n12, 2.91
function remains unchanged - it serves the same purpose, and it goes towards the same result - transferring the trust assets to the beneficiary upon a certain event. The second one is found in Scots trust law. Here, too, the concept is also based on the patrimonium element, but in a different way. In contrast to the Quebec trusts, Scottish trust law introduces an alternative perspective in respect to the trustee’s patrimonium. In stead of rendering the trust assets ownerless, even though purely theoretically, Scots law, as a Mixed legal system with Civil law dominance in property law, suggested that the trustee shall be allowed to have a separate patrimonium,108 designated exclusively for the trust assets alone. This idea has also been adopted in other jurisdictions, for example in France, trust assets form a patrimoine d’affectation, which is comprised of the segregated trust property.109 Despite that this approach of a civil law jurisdiction, too, does not resemble the one taken by Common Law countries, there is a few points that deserve special attention in order to make the picture of transplantation clearer.
In order to close this chapter, we shall elaborate on the variation and the successfulness of transplanting trust instruments from Common to civil law countries. It is evident from the previous paragraphs in this Part 2, that Common Law trusts and civil law trust do not share the same form. Under no circumstances one can deduce that the two legal families do so, and the reason for this is, regardless of which civil jurisdiction we take as an example, the unity, indivisibility and inalienability of property in civil law.110 Therefore, when speaking of the general framework of trusts, i.e. the definition, key characteristics, general principles and functions, we shall agree on the fact that the form of the product, presumably transplanted from
108 n12, 2.95 109 n98, p.4 110 n97, p.5
Common to civil law jurisdictions does not trace back to the original instrument - the English trust.
In contrast to this finding, it could be stated, that transplanted trusts have the same function as the original, and we can not speak of a benchmark and variations, and not generally of a transplanted instrument. The reason for this similarity is essentially in the nature of the instrument. In a world where protection of one’s property, i.e. assets which may be trusts’ subject matter, is fundamental. Therefore, the need for such an instrument in many jurisdictions is substantial, and the function of the trust instrument is the reason why it is being transplanted into other jurisdictions.
To conclude this chapter, we shall summarise the following: we observe a similar function of trusts in all jurisdictions: protecting the trust property, by not allowing it to form part of the trustee’s patrimony, and a variation of its form, which is so due to the different institutional design each jurisdiction has,111 which in this scenario is in respect of the notion of ownership.
2.2 Origin of Civil Law Trust or Transposition of the English Trust into Civil Law. Relationship with Equity.
After defining the civil law trust and outlining its key features, general principles and the functions it serves, this chapter will examine the development of the instrument in civil law jurisdictions. Generally speaking, there are two possible assumptions in this regards, and it is oftentimes seen that different scholars argue on this point - it is either that civil law trusts are independent concept of law, developed especially for civil law jurisdiction, coming from Roman Law, or that trusts have been transplanted from one legal family to the other.(footnotes!) This chapter will pay due respect to
both suggestions, as both of them confer some very strong arguments. Due to the fact that this piece of thesis strives for consistency and sharp framework, in order to match the methodology used in Part 1, and the extensive content dedicated to the role of Equity in the law of Trusts in Common Law Systems, this chapter will elaborate on the role of Equity in civil law both in general, and with regards trusts, and will further deduce on whether this relationship is the reason for convergence or divergence between the two legal families in relation to the law of trusts.
The first assumption brought about in the previous paragraph speaks of independency of the legal families. Scholars support this view, argue that it is generally alleged that Common Law trusts are “incompatible with the basic assumption of civil law systems.”112 For instance, Candlish-Henderson claims that civil law trusts are coeval with Common Law trusts, but unfortunately there is no evidence for their origin.113 Other authors believe that agreeing on the possibility that trust have been transplanted from Common Law is impossible, and argue that there is evidence that the trust as an instrument belongs to civil jurisdiction, and has been developed since sixteenth century as “confidentia.”114 Some jurisdictions, for example San Marino, have rejected comparative law theories which consider civil law trusts as legal transplants of the English Common Law trusts, supporting their view by arguments related to the fact that civilians have been well acquainted with the use of analogous structures to the Common Law trust, long before they established their civil codes.115 Moreover, scholars like Lupoi argue that judgments of the tribunal of the Papal State, and the Roman Rota, plus national judgments and opinions from French, Spanish, German and Italian courts all accede to the view that
112 n11, p.967
113 R Candlish-Henderson, “Trusts in Scottish Law”, Journal of Comparative Legislation and International Law, 1949, Vol.31 No.3/4 p.36
114 R H Helmholz, The Early Enforcement of Uses, 79 Colum L Rev 1503, 1508 n.31 115 n98, p.3
confidentia’s structure resembles the structure of the trust.116 Therefore, it seems unreasonable to speak of comparative law in the sense of legal transplant from one legal family to the other, but rather of a similar concept, which has the same function and form, and differs on the basis on its name and origin - which is purely civilian. The second assumption agrees on the theory that trusts is an "unique English institution”117 which if transplanted into other jurisdictions are “like those extraordinary drugs curing at the same time toothache, sprained ankles, and baldness.”118 On the one hand this statements presumes that trust instruments’ nature is universal and they could easily be adopted and adapted into jurisdiction, being either Civil or Common Law. On the other hand, however, we could just as easily notice that things do not happen as easily as Lepaulle thought so. The first indication that something within the concept of the trust is just “untranslatable” would appear to be the notion of Equity and its role within the national legal system. In other words, what exactly appears to be untranslatable is the way Equity reshapes law in order to impore its universality.
To begin with, in Part 1, we have spoken of the way trusts were brought about, and how special the role of Equity in this process was, the importance on the 14 maxims in shaping the law of trusts, and the historical background of Medieval England which necessitated such an instrument to be established. It is, therefore essential to examine to what extent does Equity have a part in the formation and operation of the law of trusts in Civil jurisdictions, a task which is oftentimes regarded as “fascination, but also elusive.”119 Most of the materials on this topic promulgate that civil law
116 n11, p.973 117 n101, Preamble
118 Pierre Lepaulle, “Civil Law Substitutes for Trusts”, 36 Yale L.J. 1126 (1927) p.1126 119 Hessel E Yntema, “Equity in the Civil Law and the Common Law”, 15 Am. J. comp. Law (1966) p.60
jurisdictions do not posses neither a law or court of Equity.120 Therefore we would be absolutely wrong if went through defining it as a separate institution like it was done so in Part 1. Regardless of this, there are other opinions and recommendation which encourage the though that Equity is more than a branch or an institution of the legal system, like it is considered to be in Common Law systems. Consequently, it is often the case that when Common lawyers and civilians speak of Equity they do not speak of one and the same thing.121 This means that, not only Civil Law jurisdiction do not have Equity as a distinct part, but there is some other concept which takes this name. The name is, however, different in the different countries - équité in France, equidad in Spain, echità in Italy, Biligkeit in German. Therefore, we could not speak of Equity as do so when it come to Anglo-American law. Regardless the word used, we find the equity element in judicial discretion, i.e. even though Civil Law judges are required to apply strictly the written law, they have discretion where a “true lacuna must be filled in.”122 Yet again, we observe the same function of equity, as we did in Part 1 of this work, it comes to remedy a potential onerosity, and facilitate the interpretation of law.
To conclude we shall restate the following - there are two assumption on the origin of Civil Law trusts - one is that they have been developed naturally developed by the Civil Legal family, and two is that they have been transplanted from Common Law to Civil Law systems, originating from England. Therefore, it might the case that Equity plays an important role in the development of trusts in Civil Law countries, if considered that Civil Law trusts have been transplanted from English Common Law and Equity. However, the analysis conducted above have come to a contrasting
120 G M Razi, “Reflections on Equity in the Civil Law Systems”, 13 Am. U. L. Rev. 24 (1963) p.24 121 ibid p.44
122 Manuel Rodrigez Ramos, “Equity in the Civil Law: A Comparative Essay”, 44 Tul. L. Rev. 720 (1969-1970) p.720
