EnglishFrenchPortugueseRussianUrdu

TRUSTS ACT, 1882

 

Sections

Contents

 

 

CHAPTER I

preliminary

 

 

Preamble

 

1.

Short title. Commencement. Local extent. Savings.

 

2.

Repeal of enactment’s.

 

3.

Interpretation

 

 

CHAPTER II

of THE creation OF trusts

 

4.

Lawful purpose.

 

5.

Trust of immovable property. Trust of moveable property.

 

6.

Creation of trust.

 

7.

Who may create trusts.

 

8.

Subject of trust.

 

9.

Who may be beneficiary. Disclaimer by beneficiary.

 

10.

Who may be trustee. No one bound to accept trust. Acceptance of trust. Disclaimer of trust.

 

 

CHAPTER III

of THE duties AND liabilities OF trustees

 

11.

Trustee to execute trust.

 

12.

Trustee to inform himself of state of trust-property.

 

13.

Trustee to protect title to trust-property.

 

14.

Trustee not to set up title adverse to beneficiary.

 

15.

Care required from trustee.

 

16.

Conversion of perishable property.

 

17.

Trustee to be impartial.

 

18.

Trustee to prevent waste.

 

19.

Accounts and information.

 

20.

Investment of trust-money.

 

20A.

Power to purchase redeemable stock at a premium.

 

21.

Mortgage of land pledged to Government under Act XX VI of 1871. Deposit in Government Savings Bank.

 

22.

Sale by trustee directed to sell within specified time.

 

23.

Liability for breach of trust.

 

24.

No set-off allowed to trustee.

 

25.

Non-liability for predecessor’s default.

 

26.

Non-liability for co-trustee’s default.   Joining in receipt for conformity.

 

27.

Several liability of co-trustees. Contribution as between co-trustees.

 

28.

Non-liability of trustee paying without notice of trans­fer by beneficiary.

 

29.

Liability of trustee where beneficiary’s interest is for­feited to the Government.

 

30.

Indemnity of trustees.

 

 

CHAPTER IV

of THE rights AND powers OF trustees

 

31.

Right to title-deed.

 

32.

Right to reimbursement of expenses. Right to be recouped for erroneous overpayment.

 

33.

Right to indemnity from gainer by breach of trust.

 

34.

Right to apply to Court for opinion in management of trust-property.

 

35.

Right to settlement of accounts.

 

36.

General authority of trustee.

 

37.

Power to sell in lots, and either-by public auction or private contract.

 

38.

Power to sell under special conditions. Power to buy in and re-sell. Time allowed for selling trust-property.

 

39.

Power to convey.

 

40.

Power to vary investments.

 

41.

Power to apply property of minors, etc., for their main­tenance, etc.

 

42.

Power to give receipts.

 

43.

Power to compound, etc.

 

44.

Power to several trustees of whom one disclaims or dies.

 

45.

Suspension of trustee’s powers by decree.

 

 

CHAPTER V

of THE disabilities OF trustees

 

46.

Trustee cannot renounce after acceptance.

 

47.

Trustee cannot delegate. Case Law

 

48.

Co-trustees cannot act singly.

 

49.

Control of discretionary power.

 

50.

Trustee may not charge for services.

 

51.

Trustee may not use trust-property for his own profit.

 

52.

Trustee for sale or his agent may not buy.

 

53.

Trustee may not buy beneficiary’s interest without per­mission. Trustee for purchase.

 

54.

Co-trustees may not lend to one of themselves.

 

 

CHAPTER VI

of THE rights AND liabilities OF THE beneficiary

 

55.

Rights to rents and profits.

 

56.

Right to specific execution. Right to transfer of possession.

 

57.

Right to inspect and take copies of instrument of trust accounts, etc.

 

58.

Right to transfer beneficial interest.

 

59.

Right to sue for execution of trust.

 

60.

Right to proper trustees.

 

61.

Right to compel to any act of duty.

 

62.

Wrongful purchase by trustee.

 

63.

Following trust-property—into the hands of third persons; into that into which it has been converted.

 

64.

Saving of rights of certain transferees.

 

65.

Acquisition by trustee of trust-property wrongfully converted.

 

66.

Right in case of blended property.

 

67.

Wrongful employment by partner-trustee of trust-pro­perty for partnership purposes.

 

68.

Liability of beneficiary joining in breach of trust.

 

69.

Rights and liabilities of beneficiary’s transferee.

 

 

CHAPTER VII

of vacating THE office OF trustee

 

70.

Office how vacated.

 

71.

Discharge of trustee.

 

72.

Petition to be discharged from trust.

 

73.

Appointment of new trustees on death, etc.

 

74.

Appointment by Court. Rules for selecting new trustees.

 

75.

Vesting of trust-property in new trustees. Powers of new trustees.

 

76.

Survival of trust.

 

 

CHAPTER VIII

of THE extinction OF trusts

 

77.

Trust how extinguished.

 

78.

Revocation of trust.

 

79.

Revocation not to defeat what trustees have duly done.

 

 

CHAPTER IX

of CERTAIN obligations IN THE nature OF trusts

 

80.

Where obligation in nature of trust is created.

 

81.

Where it does not appear that transferor intended to dispose of beneficial interest.

 

82.

Transfer to one for consideration paid by another.

 

83.

Trust incapable of execution or executed without exhaus­ting trust-property.

 

84.

Transfer for illegal purpose.

 

85.

Bequest for illegal purpose. Bequest of which revocation is prevented by coercion.

 

86.

Transfer pursuant to rescindable contract.

 

87.

Debtor becoming creditor’s representative.

 

88.

Advantage gained by fiduciary.

 

89.

Advantage gained by exercise of undue influence.

 

90.

Advantage gained by qualified owner.

 

91.

Property acquired with notice of existing contract.

 

92.

Purchase by person contracting to buy property to be held on trust.

 

93.

Advantage secretly gained by one of several compounding creditors.

 

94.

Constructive trusts in cases not expressly provided for.

 

95.

Obligor’s duties, liabilities and disabilities.

 

96.

Saving of rights of bona fide purchasers.

 

 

THE SCHEDULE

 

Trusts Act, 1882

act No. II of 1882

[13th January, 1882]

An Act to define and amend the law relating to Private Trusts and Trustees.

Preamble.

whereas it is expedient to define and amend the law relating to private trusts and trustees; It is hereby enacted as follows :

 

CHAPTER I

preliminary

1.       Short title Commencement. This Act may be called the Trusts Act, 1882: and it shall come into force on the first day of March, 1882.

Local extent; it extends to [the whole of Pakistan.

Savings But nothing herein. contained affects the rules of Muhammadan law as to waqf, or the mutual relations of the members of an undivided family as determined by any customary or personal law, or applies to public or private religious or charitable endowments, or to trusts to distribute prizes taken in war among the captors; and nothing in the second Chapter of this Act applies to trusts created before the said day.

 

2.       Repeal of Enactments. The Statute and Acts mentioned in the Schedule hereto annexed shall, to the extent mentioned in the said Schedule, be repealed, in the territories to which this Act for the time being extends.

 

3.                 Interpretation clause –

trust”.                      A “trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner:

author of the trust.            the person who reposes or declares the confidence is called the “author of the trust”:

 “trustee”: .              the person who accepts the confidence is called the “trustee”:

beneficiary”:                       the person for whose benefit the confidence is accepted is called the “beneficiary “:

trust-property”.     the subject-matter of the trust is called “trust-property” or “trust-money”:

beneficial interest”:          the “beneficial interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property;

instrument of trust”:         and the instrument, if any, by which the trust is declared is called the “instrument of trust”:

breach of trust”:   a breach of any duty imposed on a trustee, as such, by any law for the time being in force, is called a “breach of trust”:

“Registered”:                   and in this Act, unless there be something repugnant in the subject or context, “registered” means registered under the law for the registration of documents for the time being in force: a person is said to have notice” of a fact either when he actually knows that fact, or when, but for willful abstention from inquiry or gross negligence, he would have known it, or when informa­tion of the fact is given to or obtained by his agent, under the circumstances mentioned in the Contract Act, 1872, section 229; and all expressions used herein and defined in the Contract Act, 1872, shall be deemed to have the meanings respectively attributed to them by that Act.

 

 

CHAPTER II

of THE creation OF trusts

4.       Lawful purpose. A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is

(a)      forbidden by law, or

(b)      is of such a nature that, if permitted, it would defeat the provi­sions of any law, or

(c)      is fraudulent, or

(d)      involves or implies injury to the person or property of another, or

(e)      the Court regards it as immoral or opposed to public policy.

Every trust of which the purpose is unlawful is void. And where a trust is created for two purposes, of which one is lawful and the other unlawful, and the two purposes cannot be separated, the whole trust is void.

Explanation.—In this section the expression “law” includes, where the trust-property is immovable and situate in a foreign country, the law of such country.

Illustrations

(a)      A conveys property to B in trust to apply the profits to the nurture of female foundlings to be trained up as prostitutes. The trust is void.

(b)      A bequeaths property to B in trust to employ it in carrying on a smug­gling business, and out of the profits thereof to support A’s children.   The trust is void.

(c)      A, while in insolvent circumstances, transfers property to B in trust for A during his life, and after his death for B. A is declared an insolvent. The trust for A is invalid as against his creditors.

5.       Trust of immoveable property. No trust in relation to immoveable property is valid unless declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee.

Trust of moveable property. No trust in relation to moveable property is valid unless declared as aforesaid, or unless the ownership of the property is transferred to the trustee.

These rules do not apply where they would operate so as to effectuate a fraud.

 

6.       Creation of trust. Subject to the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts

(a)              an intention on his part to create thereby a trust,

(b)              the purpose of the trust,

(c)              the beneficiary, and

(d)              the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.

Illustrations

(a)      A bequeaths certain property to B, “having the fullest confidence that lie will dispose of it for the benefit of C”. This creates a trust so far as regards A and C.

(b)      A bequeaths certain property to B, “hoping he will continue it in the family”. This does not create a trust, as the beneficiary is not indicated with reasonable certainty.

(c)      A bequeaths certain property to B, requesting him to distribute it among such members of C’s family as B should think most deserving. This does not create a trust, for the beneficiaries are not indicated with reasonable certainty.

(d)      A bequeaths certain property to B, desiring him to divide the bulk of it among C’s children. This does not create a trust, for the trust-property is not indicated with sufficient certainty.

(e)      A bequeaths a shop and stock-in-trade to B, on condition that he pays A’s debts and a legacy to C. This is a condition, not a trust for A’s creditors and C.

 

7.       Who may create trusts. A trust may be created—

(a)      by every person competent to contract, and,

(b)      with the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor; but subject in each case to the law for the time being in force as to the circumstances and extent in and to which the author of the trust may dispose of the trust-property.

 

8.       Subject of trust. The subject-matter of a trust must be property transferable to the beneficiary. It must not be merely beneficial interest under a subsisting trust.

 

9.       Who may be beneficiary. Who may trustee Every person capable of holding property may be a bene­ficiary.

Disclaimer by be neficiary.- A proposed beneficiary may renounce his interest under the trust by disclaimer addressed to the trustee, or by setting up, with notice of the trust, a claim inconsistent therewith.

 

10.     How may be trustee. Every person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract.

No one is bound to accept a trust.

Acceptance trust. A trust is accepted by any words or acts of the trustee indicat­ing with reasonable certainty such acceptance.

Disclaimer of trust. Instead of accepting a trust, the intended trustee may, within a reasonable period, disclaim it, and such disclaimer shall prevent the trust-property from vesting in him.

A disclaimer by one of two or more co-trustees vests the trust-property in the other or others, and makes him or them sole trustee or trustees from the date of the creation of the trust.

Illustrations

(a)      A bequeaths certain property to B and C, his executors, as trustees for D. B and C prove A’s will. This is in itself an acceptance of the trust, and B and C hold the property in trust for D.

(b)      A transfers certain property to B in trust to sell it and to pay out of the proceeds A’s debts. B accepts the trust and sells the property. So far as regards B, a trust of the proceeds is created for A’s creditors.

(c)      A bequeaths a lakh of rupees to B upon certain trusts and appoints him his executor. B severs the lakh from the general assets and appropriates it to the specific purpose. This is an acceptance of the trust.

 

 

CHAPTER III

of THE duties AND liabilities OF trustees

 

11.     Trustee to execute trust. The trustee is bound to fulfil the purpose of the trust, and to obey the directions of the author of the trust given at the time of its creation, except as modified by the consent of all the beneficiaries being competent to contract.

Where the beneficiary is incompetent to contract, his consent may, for the purposes of this section, be given by a principal Civil Court of original jurisdiction.

Nothing in this section shall be deemed to require a trustee to obey any direction when to do so would be impracticable, illegal or manifestly injurious to the beneficiaries.

Explanation— Unless a contrary intention be expressed, the purpose of a trust for the payment of debts shall be deemed to be (a) to pay only the debts of the author of the trust existing and recoverable at the date of the instrument of trust, or, when such instrument is a will, at the date of his death, and (b) in the case of debts not bearing interest, to make such payment without interest.

Illustrations

(a)      A, a trustee, is simply authorized to sell certain land by public auction. He cannot sell the land by private contract.

(b)      A, a trustee of certain land for X, Y and Z, is authorized to sell the land to B for a specified sum. X, Y and Z, being competent to contract, consent that A may sell the land to C for a less sum. A may sell the land accordingly.

(c)      A, a trustee for B and her children, is directed by the author of the trust to lend, on B’s request, trust-property to B’s husband, C, on the security of his bond. C becomes insolvent and B requests A to make the loan. A may refuse to make it.

 

12.     Trustee to inform himself of state of trust property. A trustee is bound to acquaint himself, as soon as possible, with the nature and circumstances of the trust-property; to obtain, where necessary, a transfer of the trust-property to himself; and (subject to the provisions of the instrument of trust) to get in trust-moneys invested on insufficient or hazardous security.

Illustrations

(a)      The trust-property is a debt outstanding on personal security. The instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The trustee’s duty is to recover the debt without unnecessary delay.

(b)      The trust-property is money in the hands of one of two co-trustees. No discretionary power is given by the instrument of trust. The other co-trustee must not allow the former to retain the money for a longer period than the circumstances of the case required.

 

13.     Trustee to protect title to trust property. A trustee is bound to maintain and defend all such suits, and (subject to the provisions of the instrument of trust) to take such other steps as, regard being had to the nature and amount or value of the trust-property, may be reasonably requisite for the preservation of the trust-property and the assertion or protection of the title thereto.

Illustration

The trust-property is immoveable property which has been given to the author of the trust by an unregistered instrument. Subject to the provisions of the Indian Registration Act, 1877[, the trustee’s duty is to cause the instru­ment to be registered.

 

14.     Trustee not to set up title adverse to beneficiary. The trustee must not for himself or another set up or aid any title to the trust-property adverse to the interest of the bene­ficiary.

 

15.     Care required from trustee. A trustee is bound to deal with the trust-property as carefully as a man of ordinary prudence would deal with such property if it were his own; and, in the absence of a contract to the contrary, a trustee so dealing is not responsible for the loss, destruction or deterioration of the trust-property.

Illustrations

(a)      A, living in [Chittagong], is a trustee for B, living in Karachi]. A remits trust-funds to B by bills drawn by a person of undoubted credit in favour of the trustee as such, and payable at Karachi], The bills are dis-­honoured. A is not bound to make good the loss.

(b)      A, a trustee of leasehold property, directs the tenant to pay the rents on account of the trust to a banker, B, then in credit. The rents are accord­ingly paid to B, and A leaves the money with B only till wanted. Before the money is drawn out, B becomes insolvent. A, having had no reason to believe that B was hi insolvent circumstances, is not bound to make good the loss.

(c)      A, a trustee of two debts for B, releases one and compounds the other, in good faith, and reasonably believing that it is for B’s interest to do so A is not bound to make good any loss caused thereby to B.

(d)      A, a trustee directed to sell the trust-property by auction, sells the same, but does not advertise the sale and otherwise fails in reasonable diligence in inviting competition. A is bound to make good the loss caused thereby to the beneficiary.

(e)      A, a trustee for B, in execution of his trust, sells the trust-property, but from want of due diligence on his part fails to receive part of the purchase-money. A is bound to make good the loss thereby caused to B.

(i)       A, a trustee for B of a policy of insurance, has funds in hand for payment of the premiums. A neglects to pay the premiums, and the policy is consequently forfeited. A is bound to make good the loss to B.

(g)      A bequeaths certain moneys to B and C as trustees, and authorizes them to continue trust-moneys upon the personal security of a certain firm in which A had himself invested them. A dies, and a change takes place in the firm. B and C must not permit the moneys to remain upon the personal security of the new firm.

(h)      A, a trustee for B, allows the trust to be executed solely by this co-trustee, C. C misapplies the trust-property. A is personally answerable for the loss resulting to B.

 

16.     Conversion of perishable property. Where the trust is created for the benefit of several persons in succession, and the trust-property is of a wasting nature or a future or reversionary interest, the trustee is bound, unless an intention to the contrary may be inferred from the instrument of trust, to convert the property into property of a permanent and immediately profitable character.

Illustrations

(a)      A bequeaths to B all his property in trust for (? during his life, and on his death for D, and on D’s death for E. A’s property consists of three leasehold houses, and there is nothing in A’s will to show that he intended the houses to be enjoyed in specie. B should sell the houses, and invest the proceeds in accordance with section 20.

(b)      A bequeaths to B his three leasehold houses in [Chittagong] and all the furniture therein in trust for C during his life, and on his death for D, and on D’s death for E. Here an intention that the houses and furniture should be enjoyed in specie appears clearly, and B should not sell them.

 

17.     Trustee to be impartial. Where there are more beneficiaries than one, the trustee is bound to be impartial, and must not execute the trust for the advantage of one at the expense of another.

Where the trustee has a discretionary power, nothing in this section shall be deemed to authorize the Court to control the exercise reasonably and in good faith of such discretion.

Illustration

A, a trustee for B, C and D, is empowered to choose between several specified modes of investing the trust-property. A in good faith chooses one of these modes. The Court will not interfere, although the result of the choice may be to vary the relative rights of B, C and D.

 

18.     Trustee to prevent waste. Where the trust is created for the benefit of several persons in succession and one of them is in possession of the trust-property, if he commits, or threatens to commit, any act which is destructive or permanently injurious thereto, the trustee is bound to take measures to prevent such act.

 

19.      Accounts and information. A trustee is bound (a) to keep clear and accurate accounts of the trust-property, and (b), at all reasonable times, at the request of the beneficiary, to furnish him with full and accurate information as to the amount and state of the trust-property.

 

20.     Investment of trust-money. Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on the following securities, and on no others:—

(a)      in promissory notes, debentures, stock or other secu­rities [of any [Provincial Government] or] of the Central Government], or of the United Kingdom of Great Britain and Ireland:

[Provided that securities, both the principal whereof and the interest whereon shall have been fully and uncondi­tionally guaranteed by any such Government, shall be deemed, for the purposes of this clause, to be securities of such Government;]

(b)      in bonds, debentures and annuities  charged  or secured [before the 15th August, 1947] by the Parlia­ment of the United Kingdom] on the revenues of India or of the  [Governor General in Council] or of any Province]:

[Provided that, after the fifteenth day of February, 1916, no money shall be invested in any such annuity being a terminable annuity unless a sinking fund has been established in connection with such annuity; but no­thing in this proviso shall apply to investments made before the date aforesaid;]

(bb)    in India three and a half per cent. stock, India three percent, stock, India two and a half per cent. stock or any other capital stock which was at any time] issued by the Secretary of State for India in Council under the authority of an Act of Parliament of the United Kingdom] and charged on the revenues of India] ‘‘[or which “[was] issued by the Secretary of State on behalf of the Governor General in Council under the provisions of Part XIII of the Government of India Act, 1935;]

(c)      in stock or debentures of, or shares in, Railway or other Companies the interest whereon shall have been guaranteed by the Secretary of State for India in Council or by the “[Central Government] “[or in debentures of the Bombay [Provincial] Co-operative Bank, Limited, the interest whereon shall have been guaran­teed, by the Secretary of State for India in Council] or the Provincial Government of Bombay]: provided that after the 31st day of March, 1949 no trustee shall invest the money in debentures of the Bombay Pro­vincial Co-operative Bank, Limited;]

(d)      in debentures or other securities for money issued, under the authority of any [Central Act or Act] of a Legislature established in [a Province] by or on be­half of any municipal body, port trust or city improve­ment trust in any Presidency-town, or in Rangoon Town, or by or on behalf of the trustees of the port of Karachi:]

Provided that after the 31st day of March, 1949 no trustee shall invest the money in any securities issued by or on behalf of a municipal body, port trust or city improve­ment trust in any Presidency-town, or in Rangoon Town;]

(e)      on a first mortgage of immoveable property situate in [a Province]: Provided that the property is not a leasehold for a term of years and that the value of the property exceeds by one-third, or, if consisting of buildings, exceeds by one-half, the mortgage-money; or

(f)      on any other security expressly authorized by the instrument of trust, or by any rule which the High Court may from time to time prescribe in this behalf:

provided that , where there is a person competent to contract and entitled in possession to receive the income f the trust-property for his life, or for any greater estate, no investment on  any security mentioned or referred to in clauses (d), (e), and (f) shall be made without his consent in writing.

 

20A    Power to purchase redeemable stock at a premium. .—(1) A trustee may invest in any of the securities mentioned or referred to in section 20, notwithstanding that the same may be redeemable and that the price exceeds the redemp­tion value:

Provided that a trustee may not purchase at a price exceed­ing its redemption value any security mentioned or referred to in clauses (c) and (d) of section 20 which is liable to be redeemed within fifteen years of the date of purchase at par or at some other fixed rate, or purchase any such security as is mentioned or referred to in the said clauses which is liable to be redeemed at par or at some other fixed rate at a price exceeding fifteen per centum above par or such other fixed rate.

(2)      A trustee may retain until redemption any redeemable stock, fund or security which may have been purchased in ac­cordance with this section.]

 

21.     Mortgage of land pledged to Government under Act XXVI of 1871. Deposit in Government savings Bank. Nothing in section 20 shall apply to investments made before this Act comes into force, or shall be deemed to preclude an investment on a mortgage of immoveable property already pledged as security for an advance under the Land Improvement Act, 1871. or, in case the trust-money does not exceed three thousand rupees, a deposit thereof in a Government Savings Bank.

 

22.     Sale by trustee directed to sell within specified time. Where a trustee directed to sell within a specified time extends such time, the burden of proving, as between himself and the beneficiary, that the latter is not prejudiced by the extension lies upon the trustee, unless the extension has been authorized by a principal Civil Court of original jurisdiction.

Illustration

A bequeaths property to B, directing him with all convenient speed and within five years to sell it, and apply the proceeds for the benefit of C. Tn the exercise of reasonable discretion, B postpones the sale for six years. The sale is not thereby rendered invalid, but C, alleging that he has been injured by the postponement, institutes; a suit against B to obtain compensation. In such suit the burden of proving that C has not been injured lies on B.

 

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 half-yearly rests) at the same rate.

(f)      where the breach consists in the employment of trust-property 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 nett 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 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 lie 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. 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. Where a trustee succeeds another, he is not, as such, liable for the acts or defaults of his predecessor.

 

26.     Non-liability for co-trustee’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 co-trustee:

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. 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. 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. 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. When the beneficiary’s interest is forfeited or awarded by legal adjudication [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 [the Provincial Go­vernment] may direct in this behalf.

 

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 trust-property 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

 

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. 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.

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.

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 over­payment.

 

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. 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. 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. In addition to the powers expressly conferred by this Act and by the instrument of trust, and subject to the restrictions, if any, contained in such instrument, and to the provisions of section 17, a trustee may do all acts which are reasonable and proper for the realization, protection or benefit of the trust-property, and for the protection or support of a beneficiary who is not competent to contract.

Except with the permission of a principal Civil Court of original jurisdiction, no trustee shall lease trust-property for a term exceeding twenty-one years from the date of executing the lease, nor without reserving the best yearly rent that can be reasonably obtained.

 

37.     Power to sell in lots, and either by public auction or private contract. Where the trustee is empowered to sell any trust-property, he may sell the same subject to prior charges or not, and either together or in lots, by public auction or private contract, and either at one time or at several times, unless the instrument of trust other­wise directs.

 

38.     Power to sell under special conditions. Power to by in and re – sell. The trustee making any such sale may insert such reason­able stipulations either as to title or evidence of title, or otherwise, in any conditions of sale or contract for sale, as he thinks fit; and may also buy in the property or any part thereof at any sale by auction, and rescind or vary any contract for sale, and re-sell the property so bought in, or as to which the contract is so rescinded, without being responsible to the beneficiary for any loss occasion­ed thereby.

Where a trustee is directed to sell trust-property or to invest trust-money in the purchase of property, he may exercise a rea­sonable discretion as to the time of effecting the sale or purchase.

Illustrations

(a)      A bequeaths property to B, directing him to sell it with all convenient spied and pay the proceeds to C. This does not render an immediate sale imperative.

(b)      A bequeaths property to B, directing him to sell it at such time and in such manner as he shall think fit and invest the proceeds for the benefit of C. This does not authorize B, as between him and C, to postpone the sale to an indefinite period.

 

39.     Power to convey. For the purpose of completing any such sale, the trustee shall have power to convey or otherwise dispose of the property sold in such manner as may be necessary.

 

40.     Power to vary investments. A trustee may, at his discretion, call in any trust-property invested in any security and invest the same on any of the securi­ties mentioned or referred to in section 20, and from time to time vary any such investments for others of the same nature:

Provided that, where there is a person competent to contract and entitled at the time to receive the income of the trust-property for his life, or for any greater estate, no such change of investment shall be made without his consent in writing.

 

41.     Power to apply property of minors, etc., for their maintenance, etc. Where any property is held by a trustee in trust for a minor, such trustee may, at his discretion, pay to the guardians (if any) of such minor, or otherwise apply for or towards his maintenance or education or advancement in life, or the reason­able expenses of his religious worship, marriage or funeral, the whole or any part of the income to which he may be entitled in respect of such properly; and such trustee shall accumulate all the residue of such income by way of compound interest by investing the same and the resulting income thereof from time to time in any of the securities mentioned or referred to in section 20, for the benefit of the person who shall ultimately become entitled to the property from which such accumulations have arisen:

Provided that such trustee may, at any time, if he thinks fit, apply the whole or any part of such accumulations as if the same were part of the income arising in the then current year.

Where the income of the trust-property is insufficient for the minor’s maintenance or education or advancement in life, or the reasonable expenses of his religious worship, marriage or funeral, the trustee may, with the permission of a principal Civil Court of original jurisdiction, but not otherwise, apply the whole or any part of such property for or towards such maintenance, education, advancement or expenses.

Nothing in tills section shall be deemed to affect the provisions of any local law for the time being in force relating to the persons and property of minors.

 

42.     Power to give receipts. Any trustees or trustee may give a receipt in writing for any money, securities or other moveable property payable, trans­ferable or deliverable to them or him by reason, or in the exercise, of any trust or power; and, in the absence of fraud, such receipt shall discharge the person paying, transferring or delivering the same therefrom, and from seeing to the application thereof, or being accountable for any loss or misapplication thereof.

 

43.     Power to compound, etc. Two or more trustees acting together may, if and as they think fit,—

(a)      accept any composition or any security for any debt or for any property claimed;

(b)      allow any time for payment of any debt;

(c)      compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing whatever relating to the trust; and,

(d)      for any of those purposes, enter into, give, execute and do such agreements, instruments of composition or arrange­ment, releases and other things as to them seem ex­pedient, without being responsible for any loss occa­sioned by any act or thing so done by them in good faith.

The powers conferred by this section on two or more trustees acting together may be exercised by a sole acting trustee when by the instrument of trust, if any, a sole trustee is authorized to execute the trusts and powers thereof.

This section applies only if and as far as a contrary intention is not expressed in the instrument of trust, if any, and shall have effect subject to the terms of that instrument and to the provisions therein contained. This section applies only to trusts created after this Act comes into force.

 

44.     Power to several trustees of whom one disclaims or dies. When an authority to deal with the trust-property is given to several trustees and one of them disclaims or dies, the authority may be exercised by the continuing trustees, unless from the terms of the instrument of trust it is apparent that the authority is to be exercised by a number in excess of the number of the remaining trustees.

 

45.     Suspension of trustee’s powers by decree. Where a decree has been made in a suit for the execution of a trust, the trustee must not exercise any of his powers except in conformity with such decree, or with the sanction of the Court by which the decree has been made, or, where an appeal against the decree is pending, of the Appellate Court.

 

 

CHAPTER V

of THE disabilities OF trustees

 

46.     Trustee cannot renounce after acceptance. A trustee who has accepted the trust cannot afterwards renounce it except (a) with the permission of a principal Civil Court of original jurisdiction, or (6) if the beneficiary is com­petent to contract, with his consent, or (c) by virtue of a special power in the instrument of trust.

 

47.     Trustee cannot delegate. A trustee cannot delegate his office or any of his duties either to a co-trustee or to a stranger, unless

(a)                                                              the instrument of trust so provides, or

(b)                                                              the delegation is in the regular course of business, or

(c)                                                              the delegation is necessary, or

(d)                                                              the beneficiary, being competent to contract, consents to the delegation.

Explanation: — The appointment of an attorney or proxy to do an act merely ministerial and involving no independent discretion is not a delegation within the meaning of this section.

Illustration’s

(a)      A bequeaths certain property to B and C on certain trusts to be executed by them or the survivor of them or the assigns of such survivor. B dies. C may bequeath the trust-property to D and E upon the trusts of A’s will.

(b)      A is a trustee of certain property with power to sell the same. A may employ an auctioneer to effect the sale.

(c)      A bequeaths to B fifty houses let at monthly rents in trust to collect (lie rents and pay them to C. B may employ a proper person to collect these rents.

 

48.     Co trustees cannot act singly. When there are more trustees than one, all must join in the execution of the trust, except where the instrument of trust otherwise provides.

 

49.     Control of discretionary power. Where a discretionary power conferred on a trustee is not exercised reasonably and in good faith, such power may be controlled by a principal Civil Court of original jurisdiction.

 

50.     Trustee may not charge for services. In the absence of express directions to the contrary con­tained in the instrument of trust or of a contract to the contrary entered into with the beneficiary or the Court at the time of accepting the trust, a trustee has no right to remuneration for his trouble, skill and loss of time in executing the trust.

Nothing in this section applies to any Official Trustee, Ad­ministrator General, Public Curator or person holding a certi­ficate of administration.

 

51.     Trustee may not use trust – property for his own profit. A trustee may not use or deal with the trust-property for his own profit or for any other purpose unconnected with the trust.

 

52.     Trustee for sale or his agent may not buy. No trustee whose duty it is to sell trust-property, and no agent employed by such trustee for the purpose of the sale, may, directly or indirectly, buy the same or any interest therein, on his own account or as agent for a third person.

 

53.     Trustee may not buy beneficiary’s interest without permission. No trustee, and no person who has recently ceased to be a trustee, may, without the permission of a principal Civil Court of original jurisdiction, buy or become mortgagee or lessee of the trust-property or any part thereof; and such permission shall not be given unless the proposed purchase, mortgage or lease is manifestly for the advantage of the beneficiary.

Trustee for purchase. And no trustee whose duty it is to buy or to obtain a mortgage or lease of particular property for the beneficiary may buy it, or any part thereof, or obtain a mortgage or lease of it, or any part thereof, for himself.

 

54.     Co – trustees may not lend to one of themselves. A trustee or co-trustee whose duty it is to invest trust-money on mortgage or personal security must not invest it on mortgage by, or on the personal security of, himself or one of his co-trustees.

 

 

CHAPTER VI

of THE rights AND liabilities OF THE beneficiary

 

55.     Rights to rents and profits. The beneficiary has, subject to the provisions of the ins­trument of trust, a right to the rents and profits of the trust-property.

 

56.     Right to specific execution. The beneficiary is entitled to have the intention of the author of the trust specifically executed to the extent of the bene­ficiary’s interest; and, where there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they are competent to contract and all of one mind, he or they may require the trustee to transfer the trust-property to him or them, or to such person as he or they may direct.

When property has been transferred or bequeathed for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in the second clause of this section applies to such property during her marriage.

Print Friendly, PDF & Email