Risk Management And Sources Of Law PDF

Chapter I Risk Management and of Law Sources  Why Study Law? The answer depends upon who you are. A business must choose a product, a price, a location, and a marketing strategy. And every one of those business choices has legal...

Chapter I Risk Management and of Law Sources  Why Study Law? The answer depends upon who you are. A business must choose a product, a price, a location, and a marketing strategy. And every one of those business choices has legal consequences. Some consequences are profitable; others are financially disastrous. The difference between winning and losing in the business world often depends upon the ability to make good choices from a legal perspective. This suggests why you should study law and which parts of the law you should study. The law can both hurt and help. The law can allow you to do things that you could not otherwise do. Example: I am entitled to ignore my promises. I can stay home and read even if I agreed to meet you at the movies. There is nothing that compels me to keep my word. In the business world, however, that sort of behaviour simply cannot be tolerated. Risk Management: Analysis Risk Management: The process of identifying, evaluating, and responding to the possibility of harmful events. 3 Steps of Risk Management Process: 1. Identification: Recognize legal risks “Can we be held liable for this?” 2. Evaluation: Assessment of legal risks “What are the chances of something going wrong?” 3. Response: Reaction to legal risks “What are we going to do about it?”  Risk Management: Strategies There are potential costs associated with nearly every form of behaviour, including doing nothing at all. The goal is not necessarily to eliminate risks; it is to manage them. Risk Avoidance: Some risks are so serious that they should be avoided altogether. Example: An automobile that regularly explodes upon impact should be removed from the market. Aside from issues of morality, the financial costs of being held liable will probably outweigh any sales profits. Risk Reduction: Some risks can be reduced to an acceptable level through precautions. Example: A bank that lends $500,000 to a manufacturer realizes that the loan may not be repaid if the economy goes into recession. The bank can, however, protect itself by requiring the business to grant a mortgage over its factory. In that case, if the bank does not get its money, it may at least get the property. Risk Shifting: Even if a risk cannot be avoided/reduced, it may be shifted onto another party. Example: A construction company requires the temporary use of a crane. It can either use its own employee to operate it, or hire an independent contractor. If the crane injures a bystander, they could sue the person who was in control of the equipment. If that person was an employee, then the bystander will also be entitled to sue the company. A company is not, however, vicariously liable for an independent contractor. Risk Acceptance: It is sometimes appropriate to simply accept a risk. Example: Imagine a golf course that operates behind a factory. It is possible that a wild shot might hit a factory window, and that the golf course might be held responsible for the resulting damage. The most sensible approach might be to hope for the best and pay for any windows that are broken.  Risk Management: Techniques Insurance: An insurance policy is a type of contract. One party, called the insured, promises to pay a price, called the premium. The other party, called the insurer, promises to pay a certain amount of money if the insured suffers a certain type of loss. There are many types of insurance. Liability insurance provides a benefit if the purchaser is held liable for doing something wrong. Property insurance provides a benefit if the purchaser’s property is damaged, lost, or destroyed. In either situation, insurance shifts the risk. Insurance works by spreading the cost of that liability over the entire group. Exclusion and Limitation Clauses: Contractual terms that exclude liability for some acts/ losses, or limit compensation available. acts/losses, or limit compensation available Example: A courier company’s contract may say that it cannot be held liable at all, or for more than $100, if it loses, damages, or destroys a package. While exclusion and limitation clauses are subject to certain rules and restrictions, the law generally allows people to sign away their right to sue. Incorporation: “Limited liability”: shareholders not usually liable for company debts. Many businesses are set up as corporations or companies. The most significant benefit of incorporation is limited liability. Means that it is usually only the company itself, and not the directors or shareholders, that may be held liable for debts. Limited liability does not protect individuals from all risks. Example: employees, directors, and officers may be held personally liable for the torts that they commit.  Concept Summary: Risk Management In-House Counsel: A company may create its own permanent legal department. While that option creates an additional expense that small businesses cannot afford, it does provide more efficient risk protection. Since in-house counsel have inside knowledge of their company, they are able to both prevent problems from arising and resolve disputes that do occur.  The Nature of Law Law: A rule that can be enforced by the courts. If I merely broke a moral obligation by refusing to rescue the canoeist, then I might be punished, but only through public opinion. If you broke a legal obligation by refusing to help, then you would have more serious things to worry about. Depending on the precise nature of the legal obligation, a court might put you in jail or require you to compensate the victim’s family for his death. A Map of the Law: Introduction Civil Law: Systems trace their history to Ancient Rome. Since the Roman Empire covered most of Europe, most European countries are civilian. The only civil law jurisdiction in Canada, however, is Quebec, which initially borrowed its law from France. Jurisdiction: A geographical area that uses the same set of laws. Common Law: Systems trace their history to England. Most jurisdictions that were settled by English colonists continue to use the common law. That is true of the rest of Canada, as well as jurisdictions such as Australia, New Zealand, and most of the United States. In Canada, some types of laws are the same across the entire country (criminal laws and constitutional laws). Within Canada’s common law system, we can further organize legal rules on the basis of the topics they address. A Map of the Law:  A Map of the Law: Public Law Public Law: Concerned with governments & the ways they deal with their citizens. Includes: Constitutional Law: Provides the basic rules of our political and legal systems. Determines who is entitled to create and enforce laws, and it establishes the fundamental rights and freedoms that Canadians enjoy. Administrative Law: Concerned with the creation and operation of administrative agencies, boards, commissions, and tribunals Governments regularly delegate or assign responsibility to a variety of agencies, boards, commissions, and tribunals. Administrative law is concerned with the creation and operation of those bodies. Administrative Bodies Affecting Business: Criminal Law: Deals with offences against the state. Concerned with people who break rules that are designed to protect society as a whole. White-Collar Crimes: Committed by people in suits. A manager who steals money from the petty-cash drawer is a white-collar criminal. Corporate Crime: A crime can even be committed by a company itself. A corporate crime occurs when a used-car dealership adopts a policy of rolling back the odometers on its vehicles. That company is guilty of fraud. A company can be convicted under the criminal code for acts of directors, officers, employees and others. Tax Laws: Concerned with the rules that are used to collect money for public spending.  A Map of the Law: Private Law Private Law: Concerned with the rules that apply in private matters. Both parties in a private dispute are usually private persons, either individuals or organizations such as corporations. Can also apply to the government. The government is also subject to private law rules when it enters into private transactions, such as when a government contractually agrees to purchase paper from a store. Private law is usually divided into 3 main parts: The law of torts The law of contracts The law of property Tort: A private wrong and generally consists of a failure to fulfill a private obligation that was imposed by law. Intentional torts - such as false imprisonment Business torts - such as deceit and conspiracy Negligence - which covers most situations in which one person carelessly hurts another Law of Contracts: Concerned with the creation and enforcement of agreements. Business is based on transactions, and the law of contracts governs virtually every one of them. Contracts are involved in (i) the sale of goods, such as cows and computers; (ii) the use of negotiable instruments, such as cheques; (iii) real estate transactions, such as the purchase of land; (iv) the operation of corporations; and (v) the employment relationship that exists between a business and its workers. Law of Property: Concerned with the acquisition, use, and disposition of property. Divided into 3 main parts: 1. Real property - involves land and things that are attached to land 2. Personal property - involves things that can be moved from one place to another 3. Intellectual property - involves things that consist of original ideas, such as patents and copyrights There are also several areas of law that deal with all forms of property: The law of succession deals with the distribution of a person’s property after death. The law of trusts deals with a situation in which one person holds property on behalf of another.  A Map of the Law: Overlap Different areas of law can overlap. There are at least two possibilities: Alternative Analysis A single event can trigger more than one set of rules. If you hire lawyers who provide poor work and bad advice, you may have the option of suing them for both the tort of negligence (because they carelessly caused you to suffer a loss) and breach of contract (because they did not act as promised). Multidisciplinary Contexts Some situations involve various types of laws. An employment relationship is based on a contract between the employer and the employee. Nevertheless, the parties should also have some knowledge of administrative law (in case a company discriminates against ethnic minorities), criminal law (in case a boss sexually harasses an employee), and tort law (in case one worker injures another).  Sources of Law Our laws have three sources: 1. The Constitution 2. Legislation 3. The courts The Constitution: Introduction Constitution: The document that creates the basic rules for Canadian society, including its political and legal systems. It provides the foundation for everything else has two significant consequences: 1. Every other law in the country must be compatible with it. Section 52 of the Constitution states: “The Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect.” 2. The Constitution is very difficult to change. Most laws can be changed by a legislature or a court. The Constitution is different; as a general rule, it can be changed only through a special amending formula. This requires the consent of Parliament plus the legislatures of at least two-thirds of the provinces, where those consenting provinces represent at least 50 percent of the country’s population. Not surprisingly, constitutional amendments are rare.  The Constitution: Division of Powers Canada is a federal country because it has two levels of government. Federal: The Parliament of Canada, which is located in Ottawa, governs the country as a whole. It is composed of two parts: 1. The House of Commons consists of members of Parliament (MPs), who are elected from every province and territory. 2. The Senate consists of senators, who are appointed. Since Canada began life as a British colony and is still part of the British Commonwealth, the Queen of England remains our head of state. In reality, the country is run by the political party that has the most MPs. The leader of that party is the prime minister. Provincial and Territorial: In addition to electing MPs to represent them nationally in Ottawa, Canadians also elect politicians to represent them within their own provinces and territories (Premier). The elected body, or legislature, is usually called the Legislative Assembly. Each of the 13 legislatures is similar to Parliament. Once again, even though the official head of state is the Queen, power really is held by the party with the most elected members, whose leader is the premier. Wherever you live in Canada, you are subject to two sets of laws: federal and provincial (or territorial). With respect to any particular issue, however, there is generally only one law. To deal with that issue, sections 91 and 92 of the Constitution establish a division of powers: states the areas in which each level of government can act. Residual power: Gives the federal government authority over everything that is not specifically mentioned  Concept Summary: Division of Powers A Law is Ultra Vires: Which literally means “beyond the power,” if it was created by a government acting outside of its own area of authority. As a result of section 52 of the Constitution (which we quoted earlier), such laws have “no force or effect.” In other words, they are not really laws at all. One of the most important applications of the ultra vires doctrine affects the provinces’ ability to impose taxes. The federal government has the power to raise money by “any Mode or System of Taxation.” The provinces, in contrast, are restricted to “Direct Taxation within the Province... for Provincial Purposes.” A province consequently cannot impose an “indirect tax.”  Tax Law The cost of a direct tax: is expected to fall on the taxpayers. Example: Income tax The cost of indirect tax: is expected to be passed on from the taxpayer to someone else, such as the taxpayer’s customers Example: Sales tax The distinction between direct taxes and indirect taxes has important consequences. From the perspective of a provincial government, the prohibition on indirect taxation makes it difficult to raise enough revenue to pay for all of its needs. A province may believe that it enacted a valid demand only to have a court later decide that it created an indirect tax. The division of powers leads to a different type of problem if both levels of government create legislation that conflicts. If a court finds that the issue in a particular case really has more to do with an area of provincial power, then the provincial legislation will be effective. But if the court finds that the two statutes truly are in conflict, then the dispute will be decided by the doctrine of federal paramountcy. Doctrine of Federal Paramountcy: Determines which law applies based on the Constitution’s division of powers.  Charter of Rights and Freedoms: Introduction The Charter was introduced to protect basic rights and freedoms. Has had a profound impact on virtually every aspect of life in this country. Canadian Charter of Rights and Freedoms: 3 sections of the charter which sometimes have an impact on business: Fundamental Freedoms: Everyone has the following fundamental freedoms: Freedom of conscience and religion Freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication Freedom of peaceful assembly Freedom of association Mobility Rights: Every citizen of Canada has the right to enter, remain in and leave Canada. Every citizen of Canada and every person who has the status of a permanent resident of Canada has the right: To move to and take up residence in any province To pursue the gaining of a livelihood in any province Equality Rights: Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability. Subsection (1) does not preclude any law, program or activity that has as its object the amelioration of conditions of disadvantaged individuals or groups including those that are disadvantaged because of race, national or ethnic origin, colour, religion, sex, age or mental or physical disability. Since the Charter is part of the Constitution, any law that is inconsistent with it has “no force or effect.” Although the Charter may affect business people, it is important to realize that it does not provide property rights (to own and enjoy assets) or economic rights (to carry on business activities). The people who drafted the Charter expressly rejected a right to “the enjoyment of property.” They worried that such a right would, for instance, hamper the government’s ability to protect the environment, regulate the use of property, control resource-based industries, or restrict foreign ownership of Canadian land. They also worried that economic rights would allow wealthy individuals to frustrate government policies aimed at helping the less fortunate. As a result, the Supreme Court of Canada has said that there is no Charter right to “unconstrained freedom” in economic activities, nor is there an “unconstrained right to transact business whenever one wishes.”  Charter of Rights and Freedoms: Restrictions Leaving aside the general exclusion of property rights and economic rights, the Charter is also subject to a number of other important restrictions. Government Action: Charter only applies to government action. Not (directly) applicable against private business. The Charter’s rights and freedoms have full effect only if a person is complaining about the government’s behaviour. The Charter does not directly apply to disputes involving private parties. Corporations: Charter may apply in favour of private business. Some provisions limited to “individuals” The Charter generally does not apply against private corporations. It may not apply in favour of them either, depending on the circumstances. A corporation is a type of person, but it is not an “individual” and it cannot claim to be morally equal to human beings. Reasonable Limits: Charter rights subject to “reasonable limits” Section 1 of the Charter states that its rights and freedoms are subject to “such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.” The Constitution recognizes that it is occasionally acceptable to violate a person’s rights. Notwithstanding Clause: Charter subject to “notwithstanding clause” Government can override some rights and freedoms A serious matter, which requires the government to expressly declare that it is overriding fundamental rights and freedoms. Canadians generally oppose such a move.  Charter of Rights and Freedoms: Remedies What happens if the Charter has been violated? Any law that is inconsistent with the Charter is “of no force or effect.” Section 24 of the Charter further states that a court may award “such remedy as [it] considers appropriate and just in the circumstances.” The precise nature of the court’s response therefore depends upon the situation. Declaration: A court may simply declare that the Charter has been violated. The legislature must then find some solution to the problem. Injunction: May impose an injunction that makes the government address the problem a certain way. The choice therefore lies with the judge, rather than the legislature. Striking Down: A court may strike down or eliminate a statute that violates the Charter. That decision may take effect immediately or it may be temporarily suspended. A temporary suspension is appropriate where the immediate elimination of a statute would create substantial problems. Severance, Reading Down, and Reading In: A court may save a statute by re-writing part of it. If only one part of a statute is offensive, it may be severed or cut out. If a statute is written too broadly, it may be read down so that it applies only where it can be justified. If a statute is written too narrowly, the court may read in a broader interpretation, so that certain people are not excluded from its benefits. Damages: A plaintiff who wins a private lawsuit usually receives damages for the injuries or losses that have been suffered. The same remedy may be awarded to a person who has suffered a Charter violation. Charter damages are intended to compensate the plaintiff’s loss, vindicate the plaintiff’s rights, and deter or discourage future wrongdoing. Parliamentary Supremacy: Means that while judges are required to interpret constitutional and statutory documents, they must also obey them For that reason, Canadian judges present their decisions as part of an ongoing dialogue. Even when they strike down a law, they are merely indicating that the legislature failed to follow the rules. The government is often able to respond by creating a new law that properly respects the Charter.  Indigenous Rights: Introduction Section 35 of the Constitution states: The existing aboriginal and treaty rights of the aboriginal peoples of Canada are hereby recognized and affirmed. In this Act, “aboriginal peoples of Canada” includes Indian, Inuit and Métis people. For greater certainty, in subsection (1) “treaty rights” includes rights that now exist by way of land claims agreements or may be so acquired. Notwithstanding any other provision of this Act, the aboriginal and treaty rights referred to in subsection (1) are guaranteed equally to male and female persons. Treaty Rights: Are rights that are provided for and contained in treaty documents that were created between Indigenous Peoples and the Crown. A traditional treaty might set aside land (called reserves) for the exclusive use by Indigenous People, recognize hunting and fishing rights on unoccupied Crown land, and require the Crown to make yearly payments (called annuities). Under more modern treaties, Indigenous Peoples may secure ownership of land, acquire rights to participate in land use management, and share in profits from natural resources. Indigenous Peoples: Consist of Inuit, Métis, and First Nations. The Crown: Refers to the Queen or King, the House of Commons, the Senate, and the provincial and territorial legislatures. Before Canada became a country in 1867, treaties were created by the British Crown. Indigenous Rights: Are collective rights held by Indigenous Peoples that reflect their original use and occupation of the land. Generally involve title to land, self-government, resource exploitation, and culture and customs. Duty to Consult: Requires the Crown to consult with Indigenous Peoples whenever it intends to act in a way that may adversely affect Indigenous rights. Because the Crown “unilaterally asserted... sovereignty over pre-existing Indigenous nations, [it] is under an obligation to consult with those nations on decisions that could potentially affect their rights.”  Indigenous Rights: The Duty to Consult Although the duty to consult is imposed on the Crown, it has a significant impact on business. Business projects that touch upon Indigenous lands—such as real estate developments, logging, mining, pipelines—require governments permits and approvals. The Crown’s involvement attracts the duty to consult. Although the Crown is legally responsible for the duty to consult, it often delegates the procedural aspects of that obligation to the business interests that are involved in a project. A duty to consult arises as long as: 1. The Crown knows or, given the circumstances, should know that its act or decision. 2. Might, but not necessarily will, have a harmful impact on 3. A right that the Indigenous group either established in the past or claims and may prove in the future Elements for the Duty to Consult: The content of the duty to consult depends on the circumstances. 2 factors are important: 1. The strength of the rights claim—have the courts already recognized Indigenous rights in the area, or is there merely a possibility that they will do so? 2. The seriousness of the harmful impact—is the proposed project likely to be fundamentally incompatible with Indigenous rights, or is any harm likely to be minor and easily remedied? The results of those factors can be laid out along a spectrum. A situation involving a weak rights claim and minimal risk of harm will be located at the low end of the spectrum. A situation involving a strong rights claim and potentially profound damage will be located at the high end. And other situations will fall somewhere in the middle.  If a proposed project falls on the low end (weak claim—minor impact), then the duty may be fulfilled as long as the Indigenous group is notified about the project and provided with relevant information. If a proposed project falls at the high end (strong claim—serious impact), then the duty may require a deep consultation process that involves a meaningful two-way dialogue and entitles the Indigenous group to participate in the decision-making process. A case at the high end may also require accommodations. Accommodations: occur when a proposed project is adjusted or modified in response to Indigenous concerns Indigenous Peoples do not hold a veto. A veto is a right to reject a proposed project or prevent it from occurring. The duty to consult is not intended to give Indigenous Peoples ultimate control over government decisions. It aims instead at a reconciliation of the rights enjoyed by the peoples who traditionally occupied the land and the right of the Crown to govern all Canadians. A Business Concern: Few business projects can be undertaken without some kind of government action (such as licences, permits, regulations). If a project does trigger the duty to consult, much of the process may be delegated to the businesses involved. Evolving Law: The duty to consult is still relatively new and it continues to evolve. Fact-Sensitive: Important to appreciate that the content of the duty to consult depends on the facts of each case. Prompt Attention: If there is a possibility that the duty to consult will apply, the process should be started as soon as possible. Businesses that rush ahead with construction run the risk of delays, additional costs, and disappointment in the long run. Meaningful Discussions: If the duty to consult does apply, a business must seriously engage with the affected communities. Information should be provided, meetings should be scheduled, questions should be answered, concerns should be addressed, and thorough records should be kept for the entire exercise. It may be required to provide resources—financial or otherwise—to enable an Indigenous group to participate in a meaningful way. Satisfactory Outcome: The duty to consult does not entitle Indigenous groups to have all of their demands met. Businesses must appreciate that the process is ultimately aimed at reconciliation and that inadequate consultations (and, where appropriate, accommodations) may delay or even defeat a project.  Legislation The Constitution, including the Charter, is the first source of law. Legislation is the second. Legislation: Is law that is created by Parliament or a legislature. The most important kinds of legislation are statutes, or acts. Example: Every jurisdiction in Canada has an act that allows companies to be created. And the Criminal Code, which is a federal statute that applies across the country, determines when a crime has been committed. The Legislative Process Provides an important opportunity for risk management. The best strategy is either to prevent the creation of a law or to make sure that it is written in a way that causes as little trouble as possible. The legislative process at the federal level: Parliament consists of the House of Commons and the Senate. In most cases, a bill is introduced into the House of Commons by an MP. If the majority of MPs support it, the bill passes the first reading, usually without much discussion. Sometime later, the bill re-appears for second reading, when it is the subject of debate amongst the MPs. If it once again enjoys majority support, it is sent to a legislative committee for detailed study. After that, the bill re-appears for a third reading, when the MPs take a final vote. If the bill passes that stage, it is sent to the Senate, where the three-stage process is repeated. If all goes well, and the bill is passed by Parliament, it simply requires one last formality. Since the head of state in Canada technically is the Queen, the bill must receive royal assent, which is Her Majesty’s approval. That approval is given on her behalf by the governor general. Members of Canadian society may influence the legislative process during at least three stages: 1. Although a private citizen cannot introduce a bill into Parliament, you may lobby, or encourage, an MP to do so. 2. Influence the legislative system arises before a bill appears for second reading. You may contact an MP and express any concerns that you may have. The MP may then raise those concerns during debate. 3. Legislative committees often receive advice and assistance from people outside Parliament. If you are concerned about any particular aspect of a bill, you may have a chance to be heard in committee. Subordinate Legislation and Municipalities Statutes often set up a basic structure but allow someone else (such as a government minister, a commission, or a tribunal) to create specific rules without the need to go through the entire legislative process. Those regulations are known as subordinate legislation: the term given to regulations that are created with the authority of Parliament or the legislature. Municipalities: A town or city. When a province creates a municipality, it gives that new body the authority to pass by- laws: a type of subordinate legislation that is created by a municipality. Amongst other things, by-laws are used to license businesses, impose some sorts of taxes, plan commercial developments, and regulate parking.  The Courts: Introduction The courts are the third source of law. Judges certainly play a crucial role in connection with the other two sources of law. They must interpret and apply the words that appear in the Constitution and in legislation. The Courts: The Common Law Lawyers often refer to judge-made rules as “the common law,” that phrase has at least three different meanings, depending upon whether it refers to a system of law, a source of law, or a type of court. Systems: The term “common law” to refer to legal systems that can be traced to England and compared the common law system that operates throughout most of Canada to the civil law system that Quebec borrowed from France. Sources: Within a common law system, the term “common law” can also be used in a more specific way to refer to rules that are created by judges rather than by legislators or the drafters of the Constitution Statutes apply only to certain small areas of contract. Courts: If we limit our discussion to judge-made rules, we can use the phrase “common law” in an even more specific way. For most of its history, English law had two sets of courts: the courts of law and the courts of equity. Lawyers sometimes still talk about the “common law” when referring to rules developed in the first type of court, and about “equity” when referring to rules developed in the second type of court The Common Law:  The Courts: Law and Equity The English legal system originally had only one type of court: courts of law. Because those courts usually insisted on applying the strict letter of the law, they were often rigid and harsh. At the same time, however, the King (or Queen) was seen as the ultimate source of law. People who were unhappy with decisions they received in the courts could ask the king for relief. The King would ask his chancellor, who was his legal and religious adviser, to act on his behalf. As the number of petitions continued to increase, the chancellor asked other people to act on his behalf. The chancellor and the people under him eventually became recognized as a separate court that was known as the court of equity (or the court of chancery). Unlike the courts of law, they were much less concerned with rigid rules and much more concerned with justice. In other words, their decisions were based on equity, which, in a general sense, means fairness. Equity continues to play an important role in our legal system. However, it is much different from when it was first created. Two changes are especially significant: 1. The Nature of Equity: The concept of equity no longer allows judges to decide cases simply on the basis of fairness. Like the courts of law, the courts of equity eventually developed and applied a consistent set of rules. 2. One Set of Courts: Initially, the courts of law and the courts of equity were completely separate. Because that situation created a great deal of inconvenience, the two types of courts were joined into one at the end of the 19th century. Consequently, nearly every Canadian court is now a court of law and a court of equity. The same judges apply both sets of rules.  Trusts The division between law and equity is especially important with respect to a trust. A trust exists any time that one person owns property for the benefit of another. The most common type is an express trust, which is created when one person, called the settlor, transfers property to another person, called the trustee, to hold on behalf of the beneficiary. The trustee legally owns the property, but more importantly, the beneficiary is the equitable owner.