23.Liability for breach of trust.
23. Liability for breach of trust.-Where the trustee commits a
breach of trust, he is liable to make good the loss which the trust-
property or the beneficiary has thereby sustained, unless the
beneficiary has by fraud induced the trustee to commit the breach, or
the beneficiary, being competent to contract, has himself, without
coercion or undue influence having been brought to bear on him,
concurred in the breach, or subsequently acquiesced therein, with full
knowledge of the facts of the case and of his rights as against the
trustee.
A trustee committing a breach of trust is not liable to pay
interest except in the following cases:-
(a) where he has actually received interest:
(b) where the breach consists in unreasonable delay in
paying trust-money to the beneficiary:
(c) where the trustee ought to have received interest, but
has not done so:
(d) where he may be fairly presumed to have received
interest.
He is liable, in case (a), to account for the interest actually
received, and, in cases (b), (c) and (d), to account for simple
interest at the rate of six per cent. per annum, unless the Court
otherwise directs.
(e) where the breach consists in failure to invest trust-
money and to accumulate the interest or dividends
thereon, he is liable to account for compound interest
(with halfyearly rests) at the same rate:
(f) where the breach consists in the employment of
trustproperty or the proceeds thereof in trade or
business, he is liable to account, at the option of the
beneficiary, either for compound interest (with half-yearly rests) at the same rate, or for the net profits made by such
employment.
Illustrations
(a) A trustee improperly leaves trust-property outstanding, and
it is consequently lost: he is liable to make good the property lost,
but he is not liable to pay interest thereon.
(b) A bequeaths a house to B in trust to sell it and pay the
proceeds to C. B neglects to sell the house for a great length of
time, whereby the house is deteriorated and its market price falls. B
is answerable to C for the loss.
(c) A trustee is guilty of unreasonable delay in investing trust-
money in accordance with section 20, or in paying it to the
beneficiary. The trustee is liable to pay interest thereon for the
period of the delay.
(d) The duty of the trustee is to invest trust-money in any of
the securities mentioned in section 20, clause (a), (b), (c) or (d).
Instead of so doing, he retains the money in his hands. He is liable,
at the option of the beneficiary, to be charged either with the amount
of the principal money and interest, or with the amount of such
securities as he might have purchased with the trust-money when the
investment should have been made, and the intermediate dividends and
interest thereon.
(e) The instrument of trust directs the trustee to invest trust-
money either in any of such securities or on mortgage of immoveable
property. The trustee does neither. He is liable for the principal
money and interest.
(f) The instrument of trust directs the trustee to invest trust-
money in any of such securities and to accumulate the dividends
thereon. The trustee disregards the direction. He is liable, at the
option of the beneficiary, to be charged either with the amount of the
principal money and compound interest, or with the amount of such
securities as he might have purchased with the trust-money when the
investment should have been made, together with the amount of the
accumulation which would have arisen from a proper investment of the
intermediate dividends.
(g) Trust-property is invested in one of the securities mentioned
in section 20, clause (a), (b), (c) or (d). The trustee sells such
security for some purpose not authorized by the terms of the
instrument of trust. He is liable, at the option of the beneficiary,
either to replace the security with the intermediate dividends and
interest thereon, or to account for the proceeds of the sale with
interest thereon.
(h) The trust-property consists of land. The trustee sells the
land to a purchaser for a consideration without notice of the trust.
The trustee is liable, at the option of the beneficiary, to purchase
other land of equal value to be settled upon the like trust, or to be
charged with the proceeds of the sale with interest.
24.No set-off allowed to trustee.
24. No set-off allowed to trustee.-A trustee who is liable for a
loss occasioned by a breach of trust in respect of one portion of the
trust-property cannot set-off against his liability a gain which has
accrued to another portion of the trust-property through another and
distinct breach of trust.
25.Non-liability for predecessor's default.
25. Non-liability for predecessor's default.-Where a trustee
succeeds another, he is not, as such, liable for the acts or defaults
of his predecessor.
26.Non-liability for predecessor's default.
26. Non-liability for predecessor's default.-Subject to the
provisions of sections 13 and 15, one trustee is not, as such, liable
for a breach of trust committed by his cotrustee:
Provided that, in the absence of an express declaration to the
contrary in the instrument of trust, a trustee is so liable--
(a) where he has delivered trust-property to his co-trustee
without seeing to its proper application:
(b) where he allows his co-trustee to receive trust-property
and fails to make due enquiry as to the co-trustee's
dealings therewith, or allows him to retain it longer
than the circumstances of the case reasonably require:
(c) where he becomes aware of a breach of trust committed or
intended by his co-trustee, and either actively
conceals it or does not within a reasonable time take
proper steps to protect the beneficiary's interest.
Joining in receipt for conformity.
Marginal heading. A co-trustee who joins in signing a receipt
for trust-property and proves that he has not received the same is not
answerable, by reason of such signature only, for loss or
misapplication of the property by his co-trustee.
Illustration
A bequeaths certain property to B and C, and directs them to sell
it and invest the proceeds for the benefit of D. B and C accordingly
sell the property, and the purchase-money is received by B and
retained in his hands. C pays no attention to the matter for two years
and then calls on B to make the investment. B is unable to do so,
becomes insolvent, and the purchase-money is lost. C may be compelled
to make good the amount.
27. Several liability of co-trustees.
27. Several liability of co-trustees.-Where co-trustees jointly
commit a breach of trust, or where one of them by his neglect enables
the other to commit a breach of trust, each is liable to the
beneficiary for the whole of the loss occasioned by such breach.
Contribution as between co-trustees.
But as between the trustees themselves, if one be less guilty
than another and has had to refund the loss, the former may compel the
latter, or his legal representative to the extent of the assets he has
received, to make good such loss; and if all be equally guilty, any
one or more of the trustees who has had to refund the loss may compel
the others to contribute.
Nothing in this section shall be deemed to authorize a trustee
who has been guilty of fraud to institute a suit to compel
contribution.
28.Non-liability of trustee paying without notice of transfer by
beneficiary.
28. Non-liability of trustee paying without notice of transfer by
beneficiary.-When any beneficiary's interest becomes vested in another
person, and the trustee, not having notice of the vesting, pays or
delivers trust-property to the person who would have been entitled
thereto in the absence of such vesting, the trustee is not liable for
the property so paid or delivered.
29.Liability of trustee where beneficiary's interest is forfeited to the
Government.
29. Liability of trustee where beneficiary's interest is
forfeited to the Government.-When the beneficiary's interest is
forfeited or awarded by legal adjudication 1*[to the Government], the
trustee is bound to hold the trust-property to the extent of such
interest for the benefit of such person in such manner as 2*[the State
Government] may direct in this behalf.
30.Indemnity of trustees.
30. Indemnity of trustees.-Subject to the provisions of the
instrument of trust and of sections 23 and 26, trustees shall be
respectively chargeable only for such moneys, stocks, funds and
securities as they respectively actually receive, and shall not be
answerable the one for the other of them, nor for any banker, broker
or other person in whose hands any trustproperty may be placed, nor
for the insufficiency or deficiency of any stocks, funds or
securities, nor otherwise for involuntary losses.
CHAPTER IV
OF THE RIGHTS AND POWERS OF TRUSTEES
CHAPTER IV
OF THE RIGHTS AND POWERS OF TRUSTEES
31.Right to title-deed.
31. Right to title-deed.-A trustee is entitled to have in his
possession the instrument of trust and all the documents of title (if
any) relating solely to the trust-property.
32.Right to reimbursement of expenses.
32. Right to reimbursement of expenses.-Every trustee may
reimburse himself, or pay or discharge out of the trust-property, all
expenses properly incurred in or about the execution of the trust, or
the realization, preservation, or benefit of the trust-property, or
the protection or support of the beneficiary.
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1 The words "to Govt." successively amended by the A. O. 1937 and
the A. O. 1950 to read as above.
2 Subs. by the A. O. 1937 for "the Govt.".
If he pays such expenses out of his own pocket he has a first
charge upon the trust-property for such expenses and interest thereon;
but such charge (unless the expenses have been incurred with the
sanction of a principal Civil Court of original jurisdiction) shall be
enforced only by prohibiting any disposition of the trust-property
without previous payment of such expenses and interest.
If the trust-property fail, the trustee is entitled to recover
from the beneficiary personally on whose behalf he acted, and at whose
request, expressed or implied, he made the payment, the amount of such
expenses.
Right to be recouped for erroneous over-payment.
Where a trustee has by mistake made an over-payment to the
beneficiary, he may reimburse the trust-property out of the
beneficiary's interest. If such interest fail, the trustee is entitled
to recover from the beneficiary personally the amount of such over-
payment.
33.Right to indemnity from gainer by breach of trust.
33. Right to indemnity from gainer by breach of trust.-A person
other than a trustee who has gained an advantage from a breach of
trust must indemnify the trustee to the extent of the amount actually
received by such person under the breach; and where he is a
beneficiary the trustee has a charge on his interest for such amount.
Nothing in this section shall be deemed to entitle a trustee to
be indemnified who has, in committing the breach of trust, been guilty
of fraud.
34.Right to apply to Court for opinion in management of trust-property.
34. Right to apply to Court for opinion in management of trust-
property.-Any trustee may, without instituting a suit, apply by
petition to a principal Civil Court of original jurisdiction for its
opinion, advice or direction on any present questions respecting the
management or administration of the trust-property other than
questions of detail, difficulty or importance, not proper in the
opinion of the Court for summary disposal.
A copy of such petition shall be served upon, and the hearing
thereof may be attended by, such of the persons interested in the
application as the Court thinks fit.
The trustee stating in good faith the facts in such petition and
acting upon the opinion, advice or direction given by the Court shall
be deemed, so far as regards his own responsibility, to have
discharged his duty as such trustee in the subject-matter of the
application.
The costs of every application under this section shall be in the
discretion of the Court to which it is made.
35.Right to settlement of accounts.
35. Right to settlement of accounts.-When the duties of a
trustee, as such, are completed, he is entitled to have the accounts
of his administration of the trust-property examined and settled; and,
where nothing is due to the beneficiary under the trust, to an
acknowledgment in writing to that effect.
36.General authority of trustee.
