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22 1 An Introduction to Equity (3) Olivia may have told Peter to hold the property on trust for her three children, but added that Peter was to distribute the property to them as he wished. Here, the children, even if they are over the age of 18, cannot identify a particular part of the trust fund that belongs to them in Equity. They have nothing more than an expectation that they might receive some property, but the amount that they receive and whether they receive any thing at all will depend on the exercise of Peter’s discretion. That is why this is called a dis cretionary trust. 118 The rights to the trust property in such a trust are clearly very different from the previous two examples. The children have no rights to any particular property. In fact, they only have a right to be considered by Peter in the exercise of his discretion to distribute the property between them. (ii) Methods of creating proprietary rights Equitable proprietary rights need to be created specifically. If somebody is the legal owner of property, it does not follow that they also have an equitable right in that property. So, if you have bought a car, you will have the legal ownership of it. But there is no equitable proprietary right subsisting in the car until some event happens that creates that right. There are a variety of events that will operate to create equitable rights in property. By far the most significant is the express creation of the right, as occurs where an express trust is created. Secondly, this may arise by virtue of a presumed intention that property should be held by the legal owner on behalf of the claimant. 119 Thirdly, the equitable proprietary right may arise by operation of law, often because the defendant can be considered to have acted unconscionably. 120 It follows from the principle that a particular event is required to create equitable property rights that all property does not have both a legal and an equitable owner. A related point is that one person alone cannot have both the legal and equitable owner ship of property. 121 So, for example, when an event has occurred to create an equitable proprietary right, that event must result in different rights being in at least two differ ent people. Consequently, a trustee cannot hold property on trust just for themself. This is because the trustee will have legal title to the property, but it is nonsense to say that they hold that property on trust for themself. It does not follow, however, that a trustee cannot be both trustee and beneficiary. This is possible where the trustee holds property for themself and another, but it is only because of the interest of that other person that it is possible to conclude that a trustee also has an equitable interest in the property. A further consequence of the fundamental principle that there must always be at least one person other than the trustee who has an equitable right in property is that if, sub sequently, one person alone acquires both the legal and equitable rights, the equitable right will be destroyed. So, for example, if you, as owner of a car, agree to hold the car on trust for your friend, you will continue to have the legal title to the car, but your friend will have an equitable proprietary right in it. If your friend asks for the legal right to be transferred to them, 122 then, once the legal title has been transferred, the equitable right cannot continue to exist for the benefit of the legal owner alone and it will have been destroyed. © Oxford University Press

121 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 706 (Lord Browne-Wilkinson). 122 See Section 11.4, p. 377, for discussion of when the beneficiary can demand transfer of the legal title to property. 118 See Section 3.6.2(iii), p. 61. 119 See Section 8.2, p. 243. 120 See Section 9.3.1, p. 289.

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