CHAPTER III. OF THE DUTIES AND LIABILITIES OF TRUSTEES. execute 11. The trustee is bound to fulfil the purpose of the trust, Trustee to and to obey the directions of the author of the trust given at trust. the time of its creation, except as modified by the consent1 of all the beneficiaries 2 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 (6) in the case of debts not bearing interest, to make such payment without interest. Illustrations. (a) 4, 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‘. 1 Supra, p. 553. The author of the trust when once it has been created cannot modify it: à fortiori he cannot defeat it, 2 Bom. H. C. 133. 3 Purefoy v. Purefoy, 1 Vern. & 617. Trustee to inform himself of state of trustproperty. Trustee to protect title to trust property. Trustee not to set 12. A trustee is bound to acquaint himself, as soon as possible, with the nature and circumstances of the trustproperty; to obtain, where necessary, a transfer of the trustproperty to himself; and (subject to the provisions of the instrument of trust) to get in trust-moneys invested on insufficient or hazardous security1. 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 2. (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 required3. 13. 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. The trustee must not for himself or another set-up or up adverse aid any title to the trust-property adverse to the interest of the beneficiary 5. title. Care required from trustee. 15. 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 re 1 As a general rule, it may be taken that if the security is worth less than two-thirds of the money invested it is 'insufficient,' and that it is 'hazardous' if it is merely personal, or produces a 'gh rate of interest in proportion to value. 4 Moore, I. A. 452, even though the debt was a loan by the author of the trust on what he deemed a good investment, 5 Ves. 839. 9 Bom. H. C. 333 • Macnamara v. Carey, 1 Ir. Rep., Eq. 9. Loyd v. Spillet, 3 P. W. 344 sponsible for the loss, destruction or deterioration of the trust-property. Illustrations. (a) A, living in Calcutta, is a trustee for B, living in Bombay. 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 Bombay. The bills are dishonoured. A is not bound to make good the loss1. (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 in insolvent circumstances, is not bound to make good the loss 2. (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 B3. (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) 4, a trustee for B, in execution of his trust, sells the trustproperty, 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 B5. (f) 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 Bo. (9) 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. ▲ 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 7. (h) A, a trustee for B, allows the trust to be executed solely by his co-trustee, C. C misapplies the trust-property. A is personally answerable for the loss resulting to B. 16. Where the trust is created for the benefit of several Conversion persons in succession, and the trust-property of perish. of a wasting able pro- Beav. 603, where the trustees, having Cummins v. Cummins, 3 Jones & See infra, sec. 26, cl. (b). Trustee to be impartial. Trustee to prevent active waste. Accounts and in 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 C 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 Calcutta 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. 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 2. 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 D3. 18. 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. A trustee is bound (a) to keep clear and accurate formation. accounts of the trust-property 5, and (6), at all reasonable times, 1 if any. See Morgan v. Morgan, 14 Beav. 82: Craig v. Wheeler, 29 L. J., N. S., Ch. 374, 376. 2 Ellis v. Barker, 7 Ch. App. 104. 3 Minet v. Leman, 7 De G. M. & G. 351: Dart, 89. Such as, e. g. suing for an injunc tion, Kerr, On Injunctions, 2nd ed. 79. The trustee is not responsible for suffering permissive waste, Powys v. Blagrave, Kay, 495: 4 De G. M. & G. 448, unless of course there is a special clause of management. 5 Springett v.Dashwood, 2 Giff. 521. at the request of the beneficiary, to furnish him with full and accurate information as to the amount and state of the trustproperty 1. of trust 20. Where the trust-property consists of money and can- Investment not be applied immediately or at an early date to the purposes money. 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 the Government of India, or of the United Kingdom of Great Britain and Ireland; (6) in bonds, debentures and annuities charged by the Imperial Parliament on the revenues of India; (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; (d) in debentures or other securities for money issued by, or on behalf of, any municipal body under the authority of any Act of a legislature established in British India; (e) on a first mortgage of immoveable property situate in British India: 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 onehalf, the mortgage-money2; 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 of 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 (ƒ) shall be made without his consent in writing. of land pledged to ment under 21. Nothing in section 20 shall apply to investments Mortgage made before this Act comes into force, or shall be deemed to preclude an investment on a mortgage of immoveable property Governalready pledged as security for an advance under the Land Act XXVI Improvement Act, 1871, or, in case the trust-money does not of 1871. 1 Clarkev. Earl of Ormonde, Jac. 120. 2 Macleod v. Annesley, 16 Beav. 6co. |