Introduction 

A trustee is usually considered as the legal owner of the trust property or to the trust estate, and holds it for the benefit of the beneficiary. However, the trustee is under the obligation to perform his duties and any breach of his obligation inevitably imposes a liability upon him, although he may have acted with the most perfect ‘bona fide’ and under the most expert advice.

Briefly speaking the duty of a trustee is an obligation the failure to fulfill that will hold the trustee to legal liability for the breach of trust. It must always be remembered that a trustee cannot deal with trust property as an absolute owner can deal with his own property, his powers are always fiduciary.

Maitland lays down the following rules as to the duties of a trustee:

1. A trustee is bound to do anything that he is expressly “bidden” to do by that instrument.

2. A trustee is bound to refrain from doing anything that is expressly “forbidden” by that instrument. 

Position Of Trustees And Beneficiaries 

The definition in Section 3 emphasizes that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property. The trustee is thus the legal owner or the trust property and property vests in him as such. The trustee no doubt holds the trust property for the benefits of the beneficiaries but does not hold it on their behalf. The expressions ‘for the benefit of’ and ‘on behalf of’ are not synonyms with each other as they convey different meanings.

Duties of Trustee

The duties of a trustee have been provided in Section 11 to 20 in Chapter 3 of the Indian Trust Act. They may be summarized as under:

Trustee to Execute Trust (Section 11)

The trustee is bound to fulfill 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. The Trustee is bound to do the thing prescribed and has no discretion, if he fails to comply with the discretion he commits a “Breach Of Trust”.

Exception 

However, this duty provides two exceptions to the general rule that a trustee must obey the direction given by the author of the trust at the time of its creation. They are as follows:

1. The trustee with the consent of the beneficiaries, if they are all competent to contract, can alter the management of the trust.

2. They can avoid fulfilling the directions which are impracticable, illegal or manifestly injurious to the beneficiaries.

Case Law: Addison vs Topper (1892)

Where the trustee acted properly with reference to the facts and circumstances which existed at that time, but going to circumstances which subsequently secured, loss was caused to some of the beneficiaries. The court held that the Trustee was not liable.

Trustee To Inform Himself Of State Of Trust Property ( Section 12)

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 or trust property to himself and (subject to the provisions of the instrument of trust) to get interest money invested on insufficient or hazardous security.

It may be noted that this duty does not prescribe any time limit within which the trustee must realize the assets. In each case, the trustee would have to use his own discretion, and the court will only see whether he acted prudently, honestly and in the interest of all beneficiaries.

Case Law: Taylor vs Millington, 204

“Where a Trustee not enquiry and not taking any steps to get in any part of the trust fund which may be outstanding or improper security will be liable for the consequence of a neglect like any executor who knows that a depth is due to his status state and omits to get in any part of the trust fund which may be outstanding on improper security will be liable for the consequence of his neglect, like any executor who knows that a debt is due to his testator’s estate and omits to get in.”

Trustee To Protect Title To Trust Property (Section 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 title thereto.

The trustees are required to protect the title of trust property collectively and to exercise good faith and care and diligence as a man of ordinary diligence would protect the title of his own property. 

Case Laws: Ramesh Chandra Roy vs Hendra Kumar Roy, 1945.

It was held that, “All the trustees should be made parties to a suit to be filed. The trustees who are unwilling to join as co-plaintiffs, or where they have done some act precluding them from being plaintiffs must be joined as defendants.”

Trustee not to set up title adverse to beneficiary (Section 14)

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. Following are the duties of a trustee under this heading:

• Trustee cannot set up or aid a third party’s title against the trust.
• Trustee not to set up or aid adverse titles.
• Trustee not to put himself in a position where there is a conflict between his interest and duty.
• Duty of trustee on receipt of notice of adverse claim.

Case Law: Narayan B. Gosavi vs G.V. Gosai, AIR 1960

“A Trustee cannot consequently mix his own property with that of the trust. If he does so, the burden lies heavily upon him to prove that any particular property belongs to him as distinct from the trust properly.”

Care Required From Trustee (Section 15)

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 of to the contrary, a trustee so dealing is not responsible for the loss, destruction or deterioration of the trust property.

In the Case of Re Stuart (1897), it was held that “A trustee is bound to exercise the same degree of diligence and care in the execution of his office, as a man of ordinary prudence would exercise in the management of his own affairs. Care and attention of an ordinary man, which is needed, is not more than that is expected of him. He is to act reasonably and honestly and the burden of proving this lies on the trustee.”

Conversion Of Perishable Property (Section 16)

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 intermediately profitable character. 

Snell points out the limitations of the rule in Howe vs Earl Of Dartmouth, (1802)

Wasting and hazardous securities are to be converted in the interest of the remainder man, reversionary interest for the benefit of the tenant for life. But this duty to convert does not arise of—

• Where the property is settled by deed.
• Where the bequest is not residuary but specific nor does it apply to reality.

Exception 

In De Souza vs De Souza, it was held that “The rule will not apply if the property is specially given to persons in succession, even though a discretionary power of changing the property is given to the trustee”

Trustee To Be Impartial ( Section 17)

When 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. The trustee is bound to be Impartial in executing the trust, and must not benefit one cestui que trust at the expense of another.

Case Law: Baby vs Ridehalgh, 104 DMCG

“Where the Trustee has the 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.”

To Prevent Waste (Section 18)

When the trust is created for the benefit of several persons in succession and one of them is in possession of the trust properly, 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.

Thus, if wasting property such as leaseholds, terminable annuities etc, were to be retained, the tenant for life would profit at the expense of the remainder man and if the reversionary property were not converted, the remainder man would profit  at the expense of the tenant for life. 

Thus, the purpose of this section is to protect the trust property against improper acts of the beneficiary who is only a tenant for life. Section 18 would come into operation if such a person destroys houses or cuts down timber. However, it would have no application in case of permissive waste such as non-repair in cases where the beneficiary has no duty to repair. 

Trustee To Keep Account and Information (Section 19)

A trustee is bound to keep a clear and accurate account of the trust property, and at all reasonable times, and at the request of the beneficiary to furnish him with all full and accurate information as to the amount and state of the trust property. A cestui que trust is entitled to inspect the accounts at reasonable times and to see the vouchers, but he is not entitled to a copy of the accounts saved at his own expenses.

Case Law: Paugh vs Vanghan, 12 Barr. 517 

“It is the duty of the trustees to afford to their cestui que trust an accurate information of the disposition of the trust fund regarding all information of which they ought to be in possession, and to keep clear and distinct amounts of property.”

Investment Of Trust Property (Section 20)

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

• On Government Securities.

• Securities Charged On Government Revenues.

• Securities Under Government Guarantee For Interest. 

• Securities Of Mortgage.

• In Debentures Or Other Securities for money issued.  

Liabilities Of Trustees

The liabilities of a trustee are dealt with in Section 23 to 29 of the Indian Trusts Act. They are as follows:

Liabilities For Breach Of Trust ( Section 23)

Where the trustee commits a breach of trust, he is liable to make good the loss, which the trust property or the beneficiary hss 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 right as against the trustee

 If the cestui que trust joins with the trustee in that which is a breach of trust, knowing provides that a “breach of trust means a breach of any duty imposed on a trustee by any law for the time being in force”.

In Jankiraman Iyer v. Nilkanta Iyer, the trustees neglected their duties by not securing the highest price for the property, and instead sold it to a person who was aware that he was purchasing the same from trustees for a lower price in contravention of the trust obligations. The Madras High Court held that this was a gross breach of trust.

No Set Off Allowed To Trustee (Section 24)

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.

Thus, where there are two separate funds subject to trusts, and the trustee commits a breach of trust as to one, by which it is lost, it is impossible to permit the trustees to say that they have improved the other fund, and that fund is bound to make up for the loss of the others. 

In Vyse vs Poster, “it has been held that the trustee is liable for actual loss in each distinct and complete transaction which amounts to a breach of the trust and not for the loss in each particular item of it.”

Liability Of Trustee For Breach Of Trust By Co-trustee ( Section 25)

Subject to the provision of Section 13 & 15 one trustee is not as such liable for a breach of trust committed by his co-trustee. However the general rule is that a trustee is not liable for breach of trust unless he is personally guilty of default. 

Exceptions to the rule

A trustee will be liable for breach of trust by his co- trustee, where he is himself guilty of some neglect of duty’

• Where he has delivered trust-property to his co-trustee without seeing to its proper application;

• Where he allows his co-trustee to receive trust property and fails to make due enquiry as the co-trustee’s dealings therewith, or allows him to retain it longer than the circumstances of the case reasonably require;

• 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.

Contribution As Between Co- Trustees

The following are the cases where a contribution as between co- trustees will be affected:

• As between the trustees themselves, if one is less guilty than another and has 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.

• If all are equally guilty, one or more of the trustees who had to refund the loss may compel the others to contribute.
• Nothing, however authorizes a trustee who has been guilty of fraud to institute a suit to compel contribution.

Conclusion 

Thus, we can say that the trustee has various duties and responsibilities towards the beneficiaries and the trust property. These duties are to be exercised in consonance to the principles laid down in the Indian Trust Act. And if the trustee is found guilty of any breach of his liability, he shall be punished accordingly.