International Journal of Law And Criminology
94
https://theusajournals.com/index.php/ijlc
VOLUME
Vol.05 Issue05 2025
PAGE NO.
94-98
10.37547/ijlc/Volume05Issue05-15
The
Concept Of “Beneficial Ownership” In
Anglo-
American Law and
The Concept Of “Economic
Owne
rship” In
the Civil Law Systems of Continental
Countries
Raximova Dilorom Xaitbayevna
Teacher at Tashkent State Law University, Independent researcher, Uzbekistan
Received:
31 March 2025;
Accepted:
29 April 2025;
Published:
31 May 2025
Abstract:
The concept of “beneficial ownership” developed within the framework of equity law as a result of the
evolution of trust-
based legal relationships. It is a product of the “split” ownership model. The division of
ownership into legal title (under common law) and beneficial title (under equity law) is rooted in the unique
historical development of Anglo-American law. Within the trust framework, in accordance with the rules of equity,
a beneficial owner acquires not only a personal (in personam) right against the trustee, but also a proprietary (in
rem) right enforceable against third parties.
In contrast to Anglo-American jurisdictions, countries belonging to the continental (civil law) system recognize the
absolute nature of ownership and define the derived limited real rights at the level of national civil legislation. In
the civil law of these countries, the concept of “economic ownership” exists, which refers to the owner granting
another person the right to use the property and to derive income from it.
Keywords:
Beneficial ownership, beneficial ownership, economic ownership, common law, split ownership.
Introduction:
The concept of “beneficial ownership”
developed within the framework of equity law as a
result of the evolution of trust-based legal
relationships. It is a product of the “split” ownership
model. The division of ownership into legal title (under
common law) and beneficial title (under equity law) is
rooted in the unique historical development of Anglo-
American law. Within the trust framework, in
accordance with the rules of equity, a beneficial owner
acquires not only a personal (in personam) right against
the trustee, but also a proprietary (in rem) right
enforceable against third parties.
In contrast to Anglo-American jurisdictions, countries
belonging to the continental (civil law) system
recognize the absolute nature of ownership and define
the derived limited real rights at the level of national
civil legislation. In the civil law of these countries, the
concept of “economic ownership” exists, which refers
to the owner granting another person the right to use
the property and to derive income from it.
Although some civil law countries' civil codes (e.g., the
Hungarian Civil Code adopted in 2013) include the term
“beneficial ownership,” its meaning is equated with the
limited real right of usufruct, and thus it does not fully
correspond to the notion of beneficial ownership as
understood in common law.
In order to understand the essence of beneficial
ownership, it is important to explore the etymology
and historical origin of the term “beneficial owner.” The
word “beneficial” derives from the Latin word
beneficialis, which in turn comes from bene (meaning
“good” or “well”) and facere (meaning “to make” or “to
do”). Therefore, the literal meaning of “beneficial” is
“one who receives a benefit” or “a privileged person.”
Although the exact historical origin of the trust is
unknown, it is established that trusts were widely
practiced during the 12th century, particularly in the
era of the Crusades. Knights who departed England for
long military expeditions to conquer distant lands
International Journal of Law And Criminology
95
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
entrusted their estates to reliable individuals for
temporary management. These individuals, acting as
trustees, held full legal ownership over the knights’
land plots, including the authority to grant use of the
land to others and to collect income from it. However,
the knights intended to retain their ownership rights
(i.e., the title to the estate), since under English law at
the time, the ultimate owner of the land was
considered to be the Crown.
Thus, the concept of “split ownership” emerged: courts
of equity recognized the knights as the true (beneficial)
owners of the land, while common-law courts
considered the individuals who exercised control and
ownership powers in the knights’ absence as the legal
owners.
It should be noted that knights typically transferred
their estates for the benefit of their family members.
This type of ownership was not legal in nature, but
rather factual. Consequently, when the crusaders
returned, they could not defend their property rights in
common-law courts, which did not recognize them as
the title holders. Instead, they sought justice in the
courts of equity, led by the Lord Chancellor, which
based their judgments on principles derived from
canon and Roman law.
With the adoption of the Statute of Uses in 1535, the
beneficiary under a trust was formally recognized in
equity as the true owner of the trust property.
In the Earl of Oxford’s Case of 1615, a precedent
-setting
judgment established the supremacy of equity over
common law, including its precedence over the
principle of res judicata. In delivering the judgment, the
Lord Chancellor famously stated:
The Royal Chancery is described as “the keeper of the
King’s conscience, governed by rules of law and equity,
and uniting virtue with justice, whereas other courts
(i.e., those operating under common law rules)
proceed strictly according to the rigid rules of law.
However, in cases where the strictness of the law might
result in injustice to the citizen, the Chancery evaluates
the matter from the standpoint of equity, harmonizing
law with fairness”.
Under common law, property is considered an
indivisible category, meaning only legal ownership is
recognized. In contrast, equity acknowledges a
functional division of ownership between different
persons
—
that is, legal title may belong to one person,
while the economic or financial interest may rest with
another. The latter is referred to as beneficial
ownership.
The concept of “beneficial ownership” in equity refers
to the existence of an equitable or beneficial interest in
property, distinct from legal ownership. This concept is
closely tied to trust law, as it serves to limit the powers
of a trustee by ensuring they are exercised in the
interest of those who hold the beneficial interest.
Within the trust structure created under the principles
of equity, property is divided into two parts and vested
in two different persons: legal ownership belongs to
the trustee, while beneficial ownership belongs to the
cestui que trust (i.e., the beneficiary).
The notion of beneficial ownership has been
elaborated in several precedent-setting judicial
decisions. Indeed, in the case of Ayerst (Inspector of
Taxes) v. C&K (Construction) Ltd, Lord Diplock
emphasized that the fact that a person holding legal
title to property may not have the right to use or
dispose of its income dates back to the era of the Court
of Chancery. The trust is considered the prime example
of such “split ownership” under equity. Although legal
ownership of trust property resides with the trustee, it
is not held for their own benefit but for the benefit of
the cestuis que trust, i.e., the beneficiaries.J Sainsbury
plc v O'Connor (HM Inspector of Taxes) ishida sudya
Nours (Nourse LJ) The concept of beneficial ownership
is explained as the ownership of property for one’s own
benefit, distinguishing it from trustee ownership,
where the property is held by a trustee. Beneficial
ownership, or legal and economic ownership, exists
when property is legally owned by one person, but the
beneficial interest (equitable interest in property)
belongs to another
person.
In the case Prevost Car Inc. v. Her Majesty The Queen,
Judge Gerald J. Rip described beneficial ownership
within the context of a trust, emphasizing that the
trustee holds legal ownership of the property but
retains it for the benefit of another person. While the
trustee is the legal owner of the trust property, they do
not possess the attributes of ownership, such as the
rights to manage, use, or bear the risks associated with
the property. The trustee holds the property for the
benefit of another person, who consequently has the
rights to use, bear the risks, and own the property in an
economic sense.
Under common law, property rights are considered
divisible; however, civil law differentiates between
beneficial ownership
—
the true economic owner of
the property
—
and legal ownership. The legal owner
holds the property solely for the benefit of the
beneficiary.
In the case Jodrey Estate v. Province of Nova Scotia and
Attorneys General of British Columbia and Quebec, the
Supreme Court of Canada defined the beneficial owner
as the true and actual owner of trust property. The
International Journal of Law And Criminology
96
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
Court stated that "although property may be registered
in the name of another person or managed by a trustee
for the actual owner (the beneficiary), the person who
effectively exercises ownership rights over the trust
property is the beneficial owner." In other words,
despite the legal ownership being held by the trustee,
it is the beneficiary who holds the true economic
interest and the rights associated with ownership of the
property.
In the case Montana Catholic Missions v. Missoula
County, Justice Peckham explained the concepts of
“beneficial
use,”
“beneficial
ownership,”
and
“beneficial interest in property.” He referred to a
situation where legal ownership of property belongs to
one person, while the beneficial interest (or benefit) in
the property belongs to another person. This right is
recognized and protected by law, and can be enforced
through a court order. Essentially, the beneficial owner
has the right to use and enjoy the property, even
though the legal title may be held by someone else, and
the law acknowledges and upholds this interest.
As Professor Charles du Toit emphasized, the beneficial
owner is the person who holds the fullest attributes of
ownership rights. Consequently, the beneficial owner is
not the legal owner of a trust property and is not
recognized as the legal owner under the Anglo-
American common law system, which does not
acknowledge the “divided” property rights concept.
Although the trustee holds the legal title to the
property, they manage it not for their own benefit but
for the benefit of the beneficiary. Therefore, the
beneficiary is considered the true owner of the trust
property in equity.
As we have seen, court precedents recognize the
beneficiary as the true economic owner of the trust
property. The beneficiary has the right to possess,
derive economic benefit from, and exercise absolute
control over the property. Moreover, as the equitable
owner of the trust property, the beneficiary assumes
the risks associated with it, and has the right to enforce
the trustee's obligations under the trust agreement and
the principles of equity.
Harvard Law School professor Austin Wakeman Scott
noted that the rights of a cestui que trust (the
beneficiary) are divided into personal rights (rights in
personam) and property rights (rights in rem). If the
trustee damages the trust property, transfers it to
another person without informing them of its trust
status, or misappropriates the property, the beneficiary
—
as the true equitable owner
—
has the right to bring
a claim against the trustee for these breaches.
Additionally,
the
beneficiary
can
demand
compensation, not just for the market value of the
property, but also for any profits they could have
gained h
ad no wrongdoing occurred. The beneficiary’s
right to protect themselves against the trustee's illegal
actions is considered a personal right (right in
personam). This is secured by the law of equitable
obligations. As noted by Professor Walter W. Cook of
Columbia University, in the Anglo-American legal
system, the concepts of “in rem and in personam”
rights are applied in four different ways:
1. As a classification of “initial” rights that are protected
and can be enforced based on common law and equity
law (rights in rem, rights in personam);
2. Classifying claims as property-based (actions in rem)
and personal (actions in personam);
3. Classifying court judgments and orders as property-
based (in rem) and personal (in personam);
4. Using the concepts of act in rem and act in personam
in the enforcement process of court judgments and
orders.
Based on the above information, the in rem and in
personam rights of the beneficiary as a beneficial
owner should not be understood in the context of
property law and obligations in the Roman-Germanic
legal system. Instead, they should be seen as types of
actions provided to protect the beneficiary’s “equitab
le
interests” within the trust framework. The beneficiary
can enforce protection against third parties through
the “actio in rem” (action in rem), while against the
trustee, they may take action via the “actio in
personam” (action in personam).
Thus, in equity law, the beneficiary, as the owner of the
trust property, has the right to protection through a
personal claim (actio in personam) if the trustee fails to
fulfill their duties or performs them inadequately. This
claim is directed at a specific individual. The purpose of
this claim is to protect the beneficiary’s rights arising
from the obligations. These obligations include actions
by the trustee in performing their duties under the
trust agreement, managing the trust property
equitably, prudently, and effectively, and carrying out
the duties set forth by equity law for the benefit of the
beneficiary.
Protection through a personal claim (actio in
personam) is of a relative nature because the subjects
of such legal relationships are clearly defined: one
person (the beneficiary owner) has the right to the
obligation, and the obligor (the trustee) stands before
them.
As British legal scholar Frederick William Maitland
emphasized, the beneficiary owner has rights similar to
property rights (jura in rem), but these are not exactly
property rights.
International Journal of Law And Criminology
97
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
The beneficiary (obligee) has both personal rights (right
in personam) to protect themselves from the trustee,
as well as property rights (right in rem) that should not
be intentionally and unjustifiably violated by the world
at large. The existence of personal rights (right in
personam) leads to the creation of property rights
(right in rem).
The law of obligations in equity, like the law of
obligations in common law, is dependent on the
existence of property rights. This property belongs to
the beneficiary. If a third party intentionally and
unjustifiably damages this property, the beneficiary has
the right to file a claim for compensation for the
damage.
Undoubtedly, property rights in equity are protected
only according to equity principles. Third parties who
violate these rights will be held accountable under
equity law, not under common law principles.
Therefore, the beneficiary owner has not only personal
rights to protect themselves from the trustee but also
property rights that are protected against the world at
large.
Moreover, the beneficiary owner also has the right to
file a property claim (actio in rem), meaning that as the
owner of the trust property under equity, they have the
right to demand the restoration of their property rights
in the face of violations by third parties. This claim is
aimed at protecting the beneficiary owner's property
rights from unlawful interference and violations by
third parties.
The object of the beneficial owner's property rights is
the material (proprietary) interest in the trust property.
Protection under such a claim is absolute, as it is made
against any person who has violated or infringed upon
the beneficiary's property rights. However, this
absolute protection only exists as long as the property
rights of the beneficiary remain unviolated. Since the
violation of property rights is carried out by specific
individuals, the claim to eliminate the violation is
directed at them.
There has been a long-standing debate regarding the
existence of property rights (in rem) for the beneficiary
owner. For instance, according to Harvard Law School
professor James Barr Ames, it is incorrect to refer to the
"cestui que trust" as the owner of the trust property, as
the legal owner of the trust property is the trustee, and
two individuals with opposing interests cannot
simultaneously be the owners of the same property.
However, according to the opinion of Alastair Gadsden,
Professor of Equity and Law at the University of London
(Queen Mary University of London), beneficiary owners
possess “equitable proprietary rights” over the trust
property. .
As Austin Wakeman Scott emphasized, during the
period when the “use” right institution (the right to use
another’s property) first emerged, which lat
er became
the foundation of the trust institution, the rights
belonging to the “cestui que trust” person were not
property rights (right of ownership). Instead, these
were merely personal rights (rights in personam).
However, over time, the Chancellor granted the
beneficiary the right to protection against transferees
who had taken control of the trust property, provided
they were aware of the trust’s existence.
This right to protection was granted because the
individual acquiring the trust property was considered
to have acted dishonestly or conspired with the trustee
to violate the trust's terms. Equity imposes an
obligation on such individuals to compensate for
damages caused by the breach of the trust. Similarly,
the trustee is also required to pay specific
compensation for the breach of trust, if restoring the
trust falls within their authority.
Equity law grants the owner (in equity, the beneficiary)
the right to hold “equitable interests” over
encumbered property, a right that resembles a legal
easemen
t (legal servitude). Since an “equitable
property interest” is linked to property, just like all
other “equitable interests”, it may be lost when the
trust property is sold to a third party who purchases it
for value, provided that the purchaser was unaware of
the trust’s existence.
British lawyer Robert Megarry emphasized that the
difference between legal rights (legal rights under
common law) and “equitable rights” (rights under
equity) lies in the fact that legal rights are protected
against the entire w
orld, whereas “equitable” rights are
protected against all persons except for a bona fide
purchaser (i.e., an individual who acquires the trust
property for value, in good faith, and without
knowledge of the trust). Therefore, the beneficiary’s
“equitable rights” exclude the right to bring a claim
against such a purchaser.
Within the scope of the above statements, Professor
Gerald Greville Xneberi of Oxford University’s English
Law faculty examines “equitable interests” as not true
in rem rights, but rather hybrid rights, and emphasizes
that they are sui generis (i.e., having a unique, distinct
nature
–
author).
If the trustee sells the trust property to someone who
has notice of the trust and later regrets this action, the
trustee has the right to bring a claim against that
person to prevent the transfer of the trust property and
to “restore” it, even without the beneficiary’s
participation. Of course, if the trustee has the right to
bring such a claim, the beneficiary also has the right to
International Journal of Law And Criminology
98
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
compel the trustee to do so. However, if the trustee is
deprived of this right due to the expiration of the legal
claim period or unreasonable delay, the beneficiary will
not be able to claim the trust property through the
trustee.
Austin Wakeman Scott emphasizes that it would be
unjust to deprive the beneficiary of their “equitable
interest” simply because the trustee is incapable of
bringing a claim or has conspired with the transferee. If
the beneficiary is considered the owner in equity, they
undoubtedly cannot be deprived of their rights due to
the limitation period or “their own laches” (delay). On
the other hand, even if their right is only a personal
right, they may compel the transferee of the trust
property to compensate for the damages caused by the
breach of the trust.
The person (transferee) who unlawfully acquires trust
property manages it within the framework of a
constructive trust created for the benefit of the
beneficiary. From this point onward, the transferee is
required to return the acquired trust property either to
the beneficiary or to a new trustee appointed by the
beneficiary. The beneficiary, based on equity law, has
the right to bring an independent claim against the
purchaser (transferee), while involving the trustee as a
participant in the process.
As we can see, the existence of two owners with
different interests in trust property does not imply that
the beneficiary holds no proprietary rights over the
trust property. According to common law, the trustee,
as the legal owner of the trust property, must manage
it conscientiously and in accordance with the terms of
the trust. However, this management is not done for
the trustee's own benefit, but rather for the benefit of
the beneficiary, who is considered the equitable owner
of the trust property under equity law. In Anglo-
American law, the “equitable interests” of the
beneficiary do not conflict with the rights of the
trustee. The beneficiary has the right to enforce the
trustee’s obligations under the trust, including
demanding the trustee’s
compliance with their duties
through an action in personam, as the trustee assumes
obligations based on the contract or tort in favor of the
beneficiary.
If third parties violate trust rights, the beneficiary has
the right to bring a proprietary claim based on equity
law against a person who unlawfully holds trust
property in bad faith, in order to protect the
proprietary interest in the trust property. That is, a
claim can be brought against a person who, despite
knowing of the trust's existence, unlawfully possesses
the property or otherwise violates the ownership
rights. In this case, a constructive trust arises
—
this is a
trust in which the dishonest purchaser, despite having
wrongfully taken the trust property, is required to
manage the property for the benefit of the beneficiary,
the original owner of the trust.
The beneficiary’s proprietary rights or “proprietary
interests” in the trust property have been affirmed by
court precedents in common law jurisdictions. (Here,
“common law” is understood not as
an independent
Anglo-American legal system, but as common law
jurisdictions.).
REFERENCES
J Sainsbury plc v O’Connor (HM Inspector of Taxes).
[1991]
BTC
181.
URL:
https://library.
croneri.co.uk/cch_uk/btc/1991-btc-181
Prevost Car Inc. v. The Queen, 2008 TCC 231 (CanLII).
URL:
https://www.canlii.org/en/ca/
tcc/doc/2008/2008tcc231/2008tcc231.html
Montana Catholic Missions v. Missoula County 200 U.S.
118 (26 S.Ct. 197, 50)
Alastair Hudson (2007). Equity and trusts. Podcast
Materials
2007/08.
–
P.
7.
Available
at:
http://www.alastairhudson.com/podcasts/E&T%20
Mixed%20Podcasts/Podcastreadingmaterials.pdf
Robert Megarry and H. W. R. Wade (1975). The law of
real property. London: Stevens & Sons. 4th ed.
–
P. 118.
Harold Greville Hanbury & Jill E Martin (1962). Modern
Equity 8th ed. London, Stevens&Sons.
–
P. 446.
Austin Wakeman Scott (1917). The Nature of the Rights
of the "Cestui Que Trust", Columbia Law Review (Vol.
17, No. 4). Review paper 282.
Austin Wakeman Scott (1917). The Nature of the Rights
of the "Cestui Que Trust", Columbia Law Review (Vol.
17, No. 4). Review paper 282.
Austin Wakeman Scott (1917). The Nature of the Rights
of the "Cestui Que Trust", Columbia Law Review (Vol.
17, No. 4). Review paper 283.
Rakhimova, D. K. (2025). THE CONCEPT OF
BENEFICIARY PROPERTY IN CIVIL LAW AND ITS
CHARACTERISTICS. Google Scholar, 1(1).
Raximova Dilorom Xaitbayevna. (2025). Beneficial
ownership registers and protection mechanisms for
beneficial ownership rights in foreign countries and in
our country. International Journal of Law And
Criminology,
5(02),
54
–
57.
https://doi.org/10.37547/ijlc/Volume05Issue02-11
