§ 91 Legal and Equitable Ownership
Closely connected but not identical with the distinction between trust and beneficial ownership, is that between legal and equitable ownership. One person may be the legal and another the equitable owner of the same thing at the same time. Legal ownership is that which has its origin in the rules of the common law, while equitable ownership is that which proceeds from rules of equity divergent from the common law. The courts of common law refused to recognise equitable ownership, and denied that the equitable owner was an owner at all. The Court of Chancery adopted a very different attitude. Here the legal owner was recognised no less than the equitable, but the former was treated as a trustee for the latter. Chancery vindicated the prior claims of equity, not by denying the existence of the legal owner, but by taking from him by means of a trust the beneficial enjoyment of his property. The fusion of law and equity effected by the Judicature Act, 1873, has not abolished this distinction; it has simply extended the doctrines of the Chancery to the courts of common law, and as equitable ownership did not extinguish or exclude legal ownership in Chancery, it does not do so now.
The distinction between legal and equitable ownership is not identical with that mentioned in a previous chapter as existing between legal and equitable rights. These two forms of ownership would still exist even if all rights were legal. The equitable ownership of a legal right is a different thing from the ownership of an equitable right. Law and equity are discordant not merely as to the existence of rights, but also as to the ownership of the rights which they both recognise. When a debt is verbally assigned by A. to B., A. remains the legal owner of it none the less, but B. becomes the equitable owner of it. But there are not for that reason two debts. There is only one as before, though it has now two owners. So if A., the legal owner of a share in a company, makes a declaration of trust in favour of B., B. becomes forthwith the equitable owner of the share; but it is the same share as before, and not another. The thing which he thus equitably owns is a legal right, which is at the same time legally owned by A. Similarly the ownership of an equitable mortgage is a different thing from the equitable ownership of a legal mortgage.
Nor is the distinction between legal and equitable ownership merely equivalent to that between trust and beneficial ownership. It is true that, whenever the legal estate is in one man and the equitable estate in another, there is a trust. A legal owner is always a trustee for the equitable owner, if there is one. But an equitable owner may himself be merely a trustee for another person. A man may settle upon trust his equitable interest in a trust fund, or his equitable estate in his mortgaged land. In such a case neither trustee nor beneficiary will have anything more than equitable ownership.
If an equitable owner can be a trustee, can a legal owner be a beneficiary? As the law now stands, he cannot. But this is a mere accident of historical development, due to the fact that the courts of common law refused to recognise trusts at all. There is no more theoretical difficulty in allowing that a trustee and his beneficiary may both be legal owners, than in allowing that they may both be equitable owners. Had the courts of common law worked out a doctrine of trusts for themselves, this twofold legal ownership would have actually existed.
The practical importance of the distinction between legal and equitable ownership is the same as that already indicated as pertaining to the distinction between legal and equitable rights.212