Rights of the beneficiary and extinction of trusts
Property Law · Unit V · Topic 21 of 21 · 7 min read
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Cases checked to exist. Read the judgment before quoting a holding.
Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.
1. Rights of the beneficiary: sections 55 to 67
- Rents and profits, s.55. The beneficiary has, subject to the instrument, a right to the rents and profits of the trust property.
- Specific execution and transfer, s.56. He is entitled to have the intention of the author specifically executed to the extent of his interest. Where there is only one beneficiary and he is competent to contract, or there are several and all are competent and of one mind, they may require the trustee to transfer the property to them or as they direct. (This is the Indian form of the rule in Saunders v. Vautier, 1841.)
- Inspection and copies, s.57. He may inspect and take copies of the instrument of trust, the documents of title, the accounts of the trust property and the vouchers, and any case submitted and opinion taken for the purposes of the trust.
- Transfer of beneficial interest, s.58. A beneficiary competent to contract may transfer his interest, subject to the law in force as to the circumstances and extent in which he may dispose of it.
- Suit for execution of trust, s.59. Where no trustees are appointed, or all the trustees die, disclaim or are discharged, or for any other reason the execution of a trust by the trustee is or becomes impracticable, the beneficiary may sue for its execution by the court.
- Proper trustees, s.60. He is entitled to have the trust property properly protected and held and administered by proper persons and by a proper number of them.
- To compel performance of a duty, s.61. He may compel the trustee to perform any particular act of his duty as trustee, and restrain him from committing any contemplated or probable breach of trust.
- Wrongful purchase by trustee, s.62. Where a trustee has wrongfully bought trust property, the beneficiary may have it declared subject to the trust or retransferred, on repaying the price.
- Following trust property, s.63. Where trust property comes into the hands of a third person inconsistently with the trust, the beneficiary may require him to admit formally, or may sue for a declaration, that the property is comprised in the trust. The right is lost against a transferee in good faith for consideration without notice of the trust, and against a transferee for consideration from such a person (s.64, which also protects bona fide holders of money and negotiable instruments). Where the trustee has disposed of the property and the proceeds can be traced into other property, the trust follows the proceeds.
- Trust property acquired back by the trustee, s.65. Where a trustee wrongfully sells trust property and later becomes owner of it again, it is again subject to the trust.
- Blending, s.66. Where the trustee wrongfully mixes trust money with his own, the beneficiary is entitled to a charge on the mixed fund for the amount of the trust money.
- Partner-trustee, s.67. Where a trustee who is a partner wrongfully employs trust property in the partnership business, the other partners who have notice of the breach are liable jointly with him.
2. Liabilities of the beneficiary: sections 68 and 69
- Joining in a breach, s.68. Where one of several beneficiaries joins in a breach of trust, or knowingly obtains any advantage from it without the consent of the other beneficiaries, or gives false information or fails to disclose facts so as to induce the breach, the other beneficiaries are entitled to have his interest impounded, as far as may be, to make good the loss.
- Transferee of the beneficial interest, s.69. A person to whom a beneficiary transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in respect of that interest at the date of transfer.
3. Vacating the office of trustee: sections 70 to 72
- Section 70. The office of a trustee is vacated by his death or by his discharge from office.
- Section 71. A trustee may be discharged only (a) by the extinction of the trust; (b) by the completion of his duties under it; (c) by such means as the instrument prescribes; (d) by the appointment of a new trustee in his place under the Act; (e) by consent of himself and the beneficiary, or, where there are more beneficiaries, all of them being competent to contract; or (f) by the court to which a petition for his discharge is presented under the Act.
- Section 72. Notwithstanding the above, any trustee may apply by petition to a principal civil court of original jurisdiction to be discharged. If the court finds there is sufficient reason, it may discharge him, and direct the costs to be paid out of the trust property; if not, it may dismiss the petition and order costs against him.
New trustees are then appointed under ss.73 to 75 (see the previous note). Under s.76, on the death or discharge of one of several co-trustees, the trust survives to the others unless the instrument expressly declares otherwise.
4. Extinction of trusts: section 77
A trust is extinguished:
- (a) when its purpose is completely fulfilled;
- (b) when its purpose becomes unlawful;
- (c) when the fulfilment of its purpose becomes impossible by destruction of the trust property or otherwise; or
- (d) when the trust, being revocable, is expressly revoked.
Where the trust fails without exhausting the property, the trustee holds the balance on a resulting trust for the author or his representative (s.83).
5. Revocation: sections 78 and 79
A trust created by will may be revoked at the pleasure of the testator. A trust otherwise created can be revoked only:
- (a) where all the beneficiaries are competent to contract, by their consent;
- (b) where the trust has been declared by a non-testamentary instrument or by word of mouth, in exercise of a power of revocation expressly reserved to the author; or
- (c) where the trust is for the payment of the author's debts and has not been communicated to the creditors, at the pleasure of the author.
Under s.79, no revocation by the author defeats what the trustees have duly done before they receive notice of it. A completed private trust is therefore, as a rule, irrevocable: the author cannot change his mind once the beneficiaries' interests have arisen.
6. Problem
T, trustee of land for B, sells it to P for a fair price. P did not know of the trust. With the price T buys shares, which he holds in his own name. B wants the land back, or the shares.
Law. Sections 63, 64, 66 and 23.
Application. P is a transferee in good faith for consideration without notice; s.63 does not reach him, so B cannot recover the land. (Check, though, whether P is fixed with notice: a registered trust deed of immovable property operates as notice under Explanation I to the definition of notice in s.3 of the Transfer of Property Act, so a “bona fide” buyer is rarer than he looks.) The shares are the identifiable proceeds of the trust property and B can follow them.
Conclusion. B can claim the shares as trust property, and sue T personally under s.23 for any loss. If P had notice of the trust, B could recover the land from him.
How this is examined
Ten marks: “Explain the rights and liabilities of the beneficiary”, arranged by section with s.63 developed fully. Short notes: extinction of trust; revocation of trust; discharge of a trustee; right to follow trust property.
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