business
words | Hannah Robinson
TRUST
CRUSADERS
Preserving family wealth
T
rusts are nothing new. To the
contrary, the law of trusts
was first developed under the
jurisdiction of the King of England
in the 12th Century at the time of the
Crusades. When a landowner left his
home in England to battle in the Crusades,
he would convey the ownership of his land
to a trusted acquaintance (“the Trustee”).
The Trustee would manage the estate
and pay and receive feudal dues, on the
understanding that the ownership would
be conveyed back to the Crusader on this
return.
Unfortunately however, Crusaders often
encountered refusal from the Trustee to
hand over the property and, regrettably
for the Crusader, English common law
did not recognize their claim; as far as the
King’s courts were concerned, the land
belonged to the Trustee who was under no
GIBRALTAR MAGAZINE JUNE 2015
obligation to return it. The Crusader had
no legal claim.
The disgruntled Crusader would petition
the King, who would refer the matter
to his Lord Chancellor and he would
decide the result of the case according
to his conscience. The Lord Chancellor
considered it unacceptable that the legal
owner (the “Trustee”) could go back on his
word and deny the claims of the Crusader
(the “true” owner). He would therefore find
in favour of the returning Crusader. At this
time the principle of equity was born.
By the end of the 13th Century, England
had developed a fairly rudimental set of
laws which became known as the common
law. The common law rules provided a
satisfactory and a fair solution to most
issues, controversies and disputes. Initially,
these rules were applied in an inconsistent
manner, and in order to create a more
consistent approach and in the interest of
justice, the English courts would strictly
follow the decisions and principles laid
down in previous cases. This became
known as ‘stare decisis’ or the doctrine of
precedent.
In common law legal systems, a Trust is a
relationship whereby property is held by
one party for the benefit of another. There
is a separation of the legal and equitable
ownership of the property, the legal
ownership being with the Trustee, and
equitable title with the Beneficiary.
To this day, a Trust remains an extremely
versatile vehicle that can be used to
aide succession planning, assist in the
preservation of family wealth, and to
facilitate the protection of assets in
27
business
unstable environments, to name a few. We often
find that the prospective client appreciates the
benefits of a Trust, however, they find it difficult
to accept the concept of handing over the legal
ownership of their empire to a Trustee. We
find that explaining the concept of how trusts
originated can help to relieve their initial concerns.
We can generally define a Trust as an equitable
obligation, binding a person (“Trustee”) to deal
with property (“trust property”) owned by him
as a separate fund, distinct from his own private
property, for the benefit of persons (“beneficiaries”)
of whom he may be one, and any one of whom
may enforce the obligation.
Whilst trusts have evolved over the years, the
principle behind them remains very much the
same, centuries later we still use them just as the
Crusaders did, in the preservation of family wealth.
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