Duties and Liabilities of Trustees
Introduction
The Indian Trusts Act, 1882 lays down clear duties and liabilities for trustees to ensure proper management of trust property. Trustees are bound to act honestly, carefully, and for the benefit of beneficiaries. Failure to do so leads to legal liability.
Meaning / Definition
A trustee is a person who holds and manages trust property for the benefit of another (beneficiary). His duties are legal obligations, and failure to perform them properly is called a breach of trust (violation of duty).
Modes or Types
Duties of Trustees
Duty to execute the trust
- Trustee must carry out the purpose of the trust.
- Must follow directions given in the trust deed.
- Can use discretion only if allowed.
- Directions may be changed only with consent of all beneficiaries or court (if minor involved).
Duty to inform himself of trust property
- Trustee must understand the condition and value of trust property.
- Must ensure proper and safe investment.
Duty to protect title
- Trustee must defend legal ownership of trust property.
- Must protect property from loss or claims.
Duty not to set adverse title
- Trustee must not claim ownership against the beneficiary.
- Cannot act against beneficiary’s interest.
Duty to exercise reasonable care
- Must act like a prudent (careful) person managing his own property.
- Not liable for loss if acting honestly and carefully.
Duty to convert perishable property
- Wasting or perishable property must be converted into safe and lasting form.
- Applies when there are successive beneficiaries.
Duty to be impartial
- Must treat all beneficiaries equally.
- Cannot favour one over another.
Duty to prevent waste
- Must stop misuse or damage to trust property by any beneficiary.
Duty to keep accounts
- Must maintain clear and accurate records.
- Must provide accounts to beneficiaries on request.
Duty to invest trust funds
- Trust money must be invested in safe securities like:
- Government bonds
- Government securities
- Approved investments
Duty regarding sale within time
- If directed to sell property within a fixed time, trustee must follow it.
- Delay requires valid reason or court approval.
Liabilities of Trustees
Liability for breach of trust
- Trustee must compensate (pay back) for loss caused.
- Must also pay interest in cases like:
- Failure to invest money
- Delay in payment
- Misuse of trust funds
No set-off allowed
- Trustee cannot adjust loss against profits.
- Must personally repay loss.
Liability for wrongful acts
- Trustee is liable for acts of co-trustee if:
- He allows misuse
- He fails to supervise properly
Several liability of co-trustees
- If multiple trustees cause loss:
- Each is fully responsible for entire loss
- They can later share liability among themselves
No liability for predecessor
- New trustee is not liable for acts of previous trustee.
Non-liability without notice
- If trustee acts without knowing transfer of beneficiary’s interest, he is not liable.
Liability where beneficiary’s interest is forfeited
- If property is taken by government, trustee must act as directed by government.
Indemnity of trustee
- Trustee is protected against loss caused by:
- Bankers
- Brokers
- Other agents (if acting in good faith)
Important Case Law
Hinves v. Hinves
Established the duty of trustee to convert perishable or wasting property into safe and permanent investments.
Practical Example
A trustee is asked to sell land by auction:
- If he sells it privately → breach of trust
If trustee fails to collect full payment:
- He must compensate beneficiary
If co-trustee misuses funds and another trustee ignores it:
- Both may be liable
Summary
- Trustee must follow trust purpose and directions strictly
- Must act carefully like a reasonable person
- Must protect, invest, and manage trust property properly
- Must treat all beneficiaries fairly
- Breach of trust leads to personal liability
- Trustee must compensate losses and may pay interest
- Co-trustees can be jointly responsible
- Trustee is protected if acting honestly and in good faith