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AU20/05/LW004

Equity and trust

400level

Assignment

Origin of Trusts

The exact origin of trust cannot be ascertained and there are controversies surrounding the subject.
What is certain however is that the Court of Chancery entertained trusts cases. One school of thought
believed that trust was transplanted into England from Roman legal system. The Court of Chancery no
doubt also influenced the law of trusts as administered in that court. Another school of though however
disproved that English law of trust has no connection with Roman law. Notwithstanding this
controversy, the law of trusts as we now have it in England was greatly influenced and expanded by the
Chancellors in the Chancery Courts which administered equity, in their enforcement of uses.

The origin of the modern concept of trust has been credited to the concept of uses during the medieval
period, which was a means of conveying land to someone for the use or of one or more persons. The
concept then was that a person called the feoffor conveyed land to another person called the foefee for
the benefit of one person or more called the beneficiaries and at that time called cestui que use. In this
type of arrangement, the common law recognised only the feofee’s legal title in respect of the property
conveyed and does not recognise the interest of the1cestui que use in any way. As a result, it became
common place for the foefee to use the property for his own benefit instead of that of the cestui que
use or to use the same in an unconscionable way or to the detriment of the cestui que use or retain the
property for himself without the cestui que use being able to get relief or remedy from the common law
courts. In its equitable jurisdiction however, the Chancery courts then intervened and act on the
conscience of the feofee to make him perform according to the purpose of the conveyance and prevent
either the feofee from keeping the property for his own use or to compel the feofee to use the property
for the benefit of the cestui qui use in accordance with the agreement that the property is to be used for
the benefit of the cestui que use. Through the enforcement of uses by the courts of equity, the
equitable interest of the cestui que use in the property conveyed to the feofee became recognised. The
Courts of Chancery do also punish defendants (i.e. feoffee) who disobey its orders by committing them
to prison for contempt. The common law courts however do come to the rescue of such erring
defendants by obtaining the release of the imprisoned defendants through the writ of habeas corpus. In
connection to the relevance of the concept of uses was at the medieval period and before the Statute of
Wills 1540 was enacted, when it was not permitted to transfer land by will. At that time, land was
regarded as something personal to the owner and cannot survive him. Any attempt to transfer land by
will therefore fails and the tenure of the testator in the land will be extinguished. The concept of use
was then employed to circumvent this rule.
Another relevant discussion concerning the origin of trust is with respect to the Statute of Mortmain,
which prevented the transfer of land to corporations and ecclesiastical foundations. This was primarily
to prevent situations whereby land will be taken out of circulation because corporations live in
perpetuity and thus such land will be held forever. It also means that tax usually collected on inherited
land can no longer be collected. As a result of the employment of the concept of use, the purpose of
Statute of Mortmain was defeated resulting in the loss of tax/revenue to the crown and feudal lords.
The concept of uses then became a means of tax avoidance and this resulted in the enactment of the
Statute of Uses 1535, which has the object of investing the cestui que use immediately with the legal
title such that the feofee can eased out and incidents of keeping land out of circulation and tax
avoidance could be terminated. This objective was short-lived as lawyers devised the concept of “use
upon a use”, which was to convey land to the use a third party for the use of the actual beneficiary; with
the effect that the Statute of Uses only had effect on the first of the uses and subsequent uses were
unaffected. The incidents of feudal taxes 2however became abolished in 1660 by the Military Tenures
Abolition Act while the Statute of Uses was later repealed in 1925.

In England, the common law was applied and owing to the harshness or rigidity of this law, equitable
principles were development by the Lord Chancellor in order to mitigate the harshness and/or injustice
of the common law rules. As a result of the flexible nature of equity and the granting of reliefs to those
who the rules of common law worked injustice on, there arose profound conflict between the Lord
Ellesmere, Chancellor of the Chancery Court and the Chief Justice of the Common Pleas, Sir Edward
Coke, in the Earl of Oxford’s Case (1615) 1 Rep. Ch. 1 during the reign of King James I (1603 – 1625). The
conflict was resolved in favour of equity such that whenever there is a conflict between the doctrines of
equity and the rules of common law that of equity will prevail. Later, there was reorganization of the
courts in England by the Judicature Acts of 1873 and 1875 which resulted in the abolition of the
Chancery Court. The doctrines of equity and rules of common law then became fused and henceforth
administered in the same court.

Nature of trusts

To attempt a definition of a trust like all legal terms, is fraught with difficulty. The definition given by
Keeton has however been described as adequate, which described a trust in the following manner, “All
that can be said of a trust therefore, is that it is the relationship which arises whenever a person called
the trustee is compelled in equity to hold property, whether real or personal, and whether by legal or
equitable title, for the benefit of some persons (of whom he may be one and who are termed as ces tui
que trust) or for some object permitted by law, in such a way that the real benefit of the property
accrues, not to the trustee, but to the beneficiaries or other objects of the trust” See Keeton, The Law of
Trusts, Eight Edition, p. 3 cited in Jegede, M.I. (1999). Law of Trusts, Bankruptcy and Administration of
Estate. Lagos: MIJ Professional Publishers Limited, p. 11. By way of illustration, trusts usually involve
situations whereby individuals control or plan the distribution of their property or estate either in their
life time or after their deaths. A trust is created by an individual when he executes a written
2Declaration of Trust directing one person or more persons (sometimes this can be a corporate trust
company) called a trustee(s) to hold property or assets in accordance with the terms and conditions
contained in the trust instrument for the benefit or one or more persons or a section of the general
public, called the ‘beneficiaries’ or cestui que trust, who are the equitable owners of the property or
assets, while the legal interest is vested in the trustee. In Nigeria as in most jurisdictions, the law of
trusts is governed by statutes and case law. The trustee is charged with the management of the trust
property and holding the same according to the instructions of the settlor in the trust instrument. It is
however possible for a person to be both the trustee and the beneficiary in a trust. The written
Declaration of Trust usually names the first trustees while it specifies the position for the appointment
of successive trustees and contains the terms of the trust. These terms sets out the powers and duties of
trustees and the benefits accruing to the beneficiaries. Other ways of creating a trust are through the
exercise of power of appointment, transfer of trust either inter vivos or in someone’s Will, by contract
and statute. A trust created by a Will is referred to as a testamentary trust and the terms and conditions
of such trusts are contained in the Will creating it.

A trust may be created during someone’s lifetime i.e. inter vivos and such a trust is called a living or inter
vivos trust, in such a case, the person creating the trust is referred to as the grantor, settlor or donor.
The trust agreement or declaration usually contains the provisions guiding the trust and in the event of
the death of the settlor, the trust property will be regulated by the provisions of the trust rather the Will
of the settlor or provisions of any statute. This is because a trust may supplant a Will since all the estate
of the settlor would have already been planned and settled by the trust before the settlor’s death. On
the other hand, a trust may be the creation of a Will. A trust created inter vivos may be revocable or
irrevocable if such provision is reserved in the instrument creating the trust. An example of a trust is
when a father vests the title of his house in a choice area of Abuja to a reputable estate agent firm with
instructions to let out the house to tenants, manage it and pay a certain percentage of the rent yearly to
his daughter who is 10 years old until she attains 21 years of age when the house will become vested in
the daughter and trust determined.

A trust may also be created by contract or by statute. In a trust, the trustee occupies a position of
confidence and must act in good faith with respect to the trust property. He is in a fiduciary relationship
with the beneficiaries and must act honestly, not make secret profit, must deal with the trust property
for the benefit and in the interest of the beneficiaries and not act in a manner that can jeopardize such
interest. 3

Trust consists of vast and interrelated parts, and the issues involved may sometimes be intricate. In
most cases, trust issues often brought before the courts for adjudication are whether the trust is
question is a legal one or has been validly created, questions of lawful management of the trust
property, whether the trust is a private or public one, requests on a trustee to render account, requests
for specific performance, recover of trust assets, breach of trust and construction of trust terms, etc.

Despite the various and the imperativeness to which trust could be put into, however, trusts are less
frequently used in Nigeria as in England where the concept was received into Nigeria because of the
cultural and social differences in the lives of the people. It has to be noted that the concept of family
ownership of land in Nigeria served a purpose similar to that of trust, where the concept of individual
ownership is a foreign one, rather, land belongs to the family and the head of family holds the family
land for the use of the family members. The head of family to some extent assumes the position of a
trustee and all members of the family have equal right to the property. See Amodu Tijani v. Secretary of
Southern Nigeria [1921] 1A.C. 399 at p. 404 per Lord Haldane. The concept of trust under customary law
is however different from that under the English law because while the trustee is regarded as the owner
of the trust property, the head of family is not regarded as the owner of the family property, but rather
as the caretaker. The Land Use Act also embodied the concept of trust by vesting the control and
management of land in each State of the federation in the Governors to be held in trust and
administered for the use and common benefit of all Nigerians. See the Supreme Court decision in Abioye
v. Yakubu [1991] 5 NWLR (Pt. 190) p. 130. The concept of trust under the Land Use Act is however not
the same as in the law of trusts because the trustee under the Act, which is the Governor cannot be
compelled to render account as trustee under English law. Thus, the kind of trust created under the Act
has been regarded as a bare trust. See Abioye v. Yakubu(supra). Also, while the head of family under
customary law can be held to account, the Governor under the Act cannot be held to account.

Uses of trust

Trusts are of various types and used for different purposes which are sometimes reflected in the name
of the trust. Contrary to popular beliefs, trust is not for the exclusive preserve of rich people. People
with limited means and wealthy people can create or establish a trust for their own benefit or for the
benefit of others. For instance, trust inter vivos may be used for the purposes of asset planning and
management, for the settlor’s own benefit and may be used to dispose or distribute the settlor’s asset
after his/her death.

Trust may be used as a means of financial support and life insurance for a settlor who is incapacitated or
having some disabilities or as a security during old age. A trust can also be used to support a spouse in
the event of one of the spouse dying before the other, for the education endowment of settlor’s
children or other persons who may be underage at the time of the settlor’s death. Trust may also be
used to as a means of giving out gifts or transferring property to loved ones, family members or other
objects. A trust can equally be used to benefit or improve a definite section of the society or such a
section of the general public capable of being made certain. Examples of these are charitable trusts
established for the purpose of providing members of the public with education or those created for the
propagation of religion. Despite the variety of purposes that trusts can be put into, based on pubic
policy, a trust that is illegal or created with the intention of evading creditors or legal liabilities, or to be
used as an instrument of fraud or one contrary to public policy will not be recognised and would be set
aside by the law court. The same principle was encapsulated by equity.

Classification of trust

Classifying trusts is a bit an uneasy task and classification varies according to the classifiers. A distinctive
feature of classification of trusts is according to use or object. Hence, most names of trusts are reflective
of their purposes or objects. A first and major classification of trusts is into private, public or charitable
trusts.
Private trust is one that is meant to benefit an individual or a group or people.

Public or charitable trust on the other hand is one that is structured to benefit the general public or a
section of it. However, while a charitable trust is always a public trust, not all public trusts are charitable
trusts.

Trusts are further divided into other compartments of express, constructive, implied, resulting trusts,
ministerial or instrumental trusts and discretionary trusts. Irrespective of the classification of trusts into
different classes, a distinctive difference to note in the various classifications is between those trusts
that are created by the act of the parties and those that evolved by virtue of the operation of law.
Flowing from this, trusts that are created by the act of the parties are referred to as express trusts while
those that evolved by operation of law are called implied trusts.

Requirements for Creating Inter Vivos and Will Trusts

1.) Inter Vivos Trusts

No formality is required for the creation of a trust if the property involved is in personalties, i.e. tangible
personal movable properties, such as vehicles, shoes, television, etc. including money. What is essential
is that, the manifestation of the intention to create a trust on the part of the settlor must be very clear.
See Paul v. Constance [1977] WLR 521. Mere intention to benefit an imprecise person will not be
sufficient. See Jones v. Lock (1865) L.R. 1 Ch. App. 25. If the property is realty (i.e. immovable property,
such as land), the intention to benefit someone must be evidenced in writing as required by the Statute
of Frauds, Section 7; which requires that any declaration of trust relating to land to be evidenced by a
memorandum in writing signed by the party creating the trust. The position on the States forming the
old Western Nigeria is captured by Section 78(1)(b) of the Property and Conveyancing Law, which
provides to the same effect that any declaration in trust in respect of land or any interest therein must
be evidenced and proved by some writing signed by some person who is able to declare such trust or by
his will. See Forster v. Hale (1798) 3 Ves 696 per Arden M.R. The addition of the words “signed by some
person who is able to declare such trust or by his will”, is a clear indication that there are some persons
who do not have capacity to declare inter vivos trust or by will. This is the reason why we have to treat
the issue of capacity in separately in this unit, to enable you know those who have legal capacity and
those who have not. You must know that failure to comply with the above formalities may be fatal as
the trust will be rendered unenforceable. Also note that, writing is not required in 5respect of
constructive and resulting trusts in realty since these are implied and arise independently of the exercise
of the will of the parties.

Note however that, the formality of writing is further required in respect of a disposition of an equitable
interest in both personalty and realty under a trust by the beneficiary. Failure to do so renders the
disposition void. See Section 9 Statute of Frauds and Section 78(1)(C) of Property and Conveyancing Law.

2.) Trust by Will

In order to create a trust by will, some formalities are required both for the validity of the will and of the
trust. According to the law (The Will’s Act 1837 (Section 9) as amended by the Wills (Amendment) Act,
1957 and the Wills Law 1959 Cap. 133, Laws of Western Nigeria, 1959 applicable to the States forming
the old Western Nigeria), these requirements are:

i.) The will must be in writing.

ii.) It must be signed by the testator or by some other person in his presence and by his direction.

iii.) The signature of the testator must be attested by two witnesses, who must be present together in
the presence of the testator. Failure to comply with the above provisions of the law will render the trust
to be void and no interest will pass under the will. Exceptions to this are secret trusts, whereby
irrespective of the non-compliance with the provisions of the law, dispositions made under such trusts
can be enforced in equity. 6

Constitution of Trusts

You must note that despite compliance with the provisions of law in creating a trust, coupled with the
presence of clear intention of the testator to create a trust, such trust may run into trouble waters if the
testator does not convey the property which is to be the subject matter of the trust to the trustee, a
process called constitution of trust. The importance of this is that, the beneficiary upon conveyance of
the trust property to the trustee, an equitable interest is created in6his favour while the legal interest is
vested in the trustee. Thus, where the settlor

conveys no property, then the trust is said not to be constituted and no interest

passes to the beneficiary.

This issue will further be examined in the next unit for clarity.

Capacity to Create Trust

In order to create a valid express trust, part of the requirements is the legal capacity of the settlor,
whether individual, corporation or statutory bodies, to create it. Related to this is the capacity of a
person to hold interest in real property. Where a person cannot hold interest in land, this will affect the
capacity to create a trust. The situation of capacity to hold interest in land varies according to the
operative law. The issues will now be examined as follows:

1.) Individual
At common law for instance, an infant is capable of holding a legal interest in landed property. However,
a sale or disposition of such property is voidable and may be repudiated before the infant attains the
age of majority or within a reasonable time after attaining the age of majority. At common law, 21 years
was adopted as the age of majority and anyone below this age is an infant. Thus, the position of an
infant or a minor who attempts to create a trust, especially in a situation where the trust is not in his
interest, will have the same effect at common law. The common law age of majority is 21 years and this
position has been restated by some State laws in the Federation, e.g. Section 2 of the Infants Law, Cap.
49 Laws of Western Region states that, an infant is someone under the age of twenty one years. This has
been adopted and now applicable in States forming the old Western Region of Nigeria. Consequently,
any person of 21 years of age and above is regarded as of full age and has the capacity to hold legal
interest in real property. Although, some statutory provisions have specified 18 years as “age of
majority” or “full age”, see for example, section 277 of the Child’s Right Act, Sections 29 (4)(a) and 35(1)
(d) of the 1999 Constitution, and Section 20(1)(a) of the Companies and Allied Matters Act, the age of
majority in Nigeria for other purposes nevertheless remains 21 years. See the Court of Appeal decision
in Elias v. Elias [2001] 9 N.W.L.R. (Part 718) p. 429. With respect to the States where the Settled Act,
1882 operates in Nigeria, and an infant has interest in a real property, such land becomes a settled land.
Thus, the infant becomes a tenant for life and the statutory powers vested in the infant as tenant for life
will be exercised on his behalf by the trustees of that settlement. 7

However, in some other States in Nigeria forming the old Western and MidWestern Nigeria, an infant
cannot hold a legal interest in real property and where land was conveyed to an infant, which will result
in the creation of a trust for sale in favour of the infant. It follows from the above that an infant cannot
create a trust of real property or create a valid will except such an infant is a soldier at war or mariners
at sea. An infant can however create a trust over both legal and equitable interest in pure personality
and over equitable interest only in real property.

ii.) People with Mental Disability

People with mental disability also cannot validly create or have a trust enforced directly against them,
since their mental deficiency may itself encumber their ability to validly dispose their properties or make
will. Some of the things that may invalidate such trusts are the possible contradicting instructions of the
insane settlor/testator or that he/she does not appreciate the nature or effect of such instructions. See
Re Beaney [1978] 1 W.L.R. 770. It is however possible to approach the courts for directions in respect of
the settlement to be made on the property of an insane person. See for example Section 180 of the
Property and Conveyancing Law for example, Section 180 of the Property and Conveyancing Law. If the
trust was created during the time that such an insane settlor was in his lucid period and he/she fully
understands the nature of his act and the consequences of the same, such trust may be upheld as valid.

iii.) Statutory and Incorporated Companies

Statutory bodies and incorporated companies can also create trusts if the power to do so is contained in
their enabling law and memorandum of association, otherwise any trust created will be declared ultra
vires. By virtue of Section 38(1) of the Companies and Allied Matters Act, incorporated companies have
all the powers of a natural person of full age and capacity in the execution of its business and objects. In
effect, they can create trusts without such powers being expressly contained in their memo, the power
to do so may be limited by their memorandum of association or by law.

CONCLUSION

Compliance with the requirements for the creation of a trust is sine qua non if such trust is not to be
declared invalid. From the examination of these requirements above, you will realize clearly that
creating or settling a trust is something that should be given to professionals to handle in order to
perfect the intricacies, including ensuring that there is legal capacity on the part of the settlor/trustee,
and avoid pitfalls which can render the trust from been declared void by the courts.