Trust Law - History

History

Roman law had a well-developed concept of the trust (fideicommissum) in terms of "testamentary trusts" created by wills but never developed the concept of the "inter vivos trust" that applied while the creator was still alive. This was created by later common law jurisdictions.

Personal trust law developed in England at the time of the Crusades, during the 12th and 13th centuries.

At the time, land ownership in England was based on the feudal system. When a landowner left England to fight in the Crusades, he needed someone to run his estate in his absence, often to pay and receive feudal dues. To achieve this, he would convey ownership of his lands to an acquaintance, on the understanding that the ownership would be conveyed back on his return. However, Crusaders would often return to find the legal owners' refusal to hand over the property.

Unfortunately for the Crusader, English common law did not recognize his claim. As far as the King's courts were concerned, the land belonged to the trustee, who was under no obligation to return it. The Crusader had no legal claim. The disgruntled Crusader would then petition the king, who would refer the matter to his Lord Chancellor. The Lord Chancellor could do what was "just" and "equitable", and had the power to decide a case according to his conscience. At this time, the principle of equity was born.

The Lord Chancellor would consider it "unconscionable" that the legal owner could go back on his word and deny the claims of the Crusader (the "true" owner). Therefore, he would find in favor of the returning Crusader. Over time, it became known that the Lord Chancellor's court (the Court of Chancery) would continually recognize the claim of a returning Crusader. The legal owner would hold the land for the benefit of the original owner, and would be compelled to convey it back to him when requested. The Crusader was the "beneficiary" and the acquaintance the "trustee". The term "use of land" was coined, and in time developed into what we now know as a trust.

The primogeniture system, in which the first-born male inherited all the property and "usually assumes the responsibility of trusteeship of the property and of adjudicating attendant disputes", could be considered a trust.

The waqf is an equivalent institution in Islamic law, restricted to charitable trusts.

"Antitrust law" emerged in the 19th century when industries created monopolistic trusts by entrusting their shares to a board of trustees in exchange for shares of equal value with dividend rights; these boards could then enforce a monopoly. However, trusts were used in this case because a corporation could not own other companies' stock and thereby become a holding company without a "special act of the legislature". Holding companies were used after the restriction on owning other companies' shares was lifted.