Page:EB1911 - Volume 27.djvu/350

 receipt for the consideration money or other consideration, the deed being executed or the endorsed receipt being signed by the trustee; and a trustee is not chargeable with breach of trust by reason only of his having made or concurred in making any such appointment; and the producing of any such deed by the solicitor is a sufficient authority to the person liable to pay for his paying to the solicitor without the solicitor producing any separate or other direction or authority in that behalf from the trustee. (3) In the case of co-trustees the office must be exercised by all the trustees jointly. (4) On the death of one trustee there is survivorship: that is, the trust will pass to the survivors or survivor. (5) One trustee shall not be liable for the acts of his co-trustee. (6) A trustee shall derive no personal benefit from the trusteeship. The office cannot be renounced or delegated, because it is one of personal confidence. It can, however, be resigned, and legislation has given a retiring trustee large powers of appointing a successor. The liability of one trustee for the acts or defaults of another often raises very difficult questions. A difference is made between trustees and executors. An executor is liable for joining in a receipt pro forma, as it is not necessary for him to do so, one executor having authority to act without his co-executor; a trustee can show that he only joined for conformity, and that another received the money. The rule of equity by which a beneficiary who consented to a breach of trust was liable to indemnify the trustees to the extent of his interest has taken definite statutory shape in s. 45 of the Trustee Act 1893 (replacing s. 6 of the Trustee Act 1888), which enacts that when a trustee commits a breach of trust at the instigation or request, or with the consent in writing of a beneficiary, the High Court may, if it thinks fit, and notwithstanding that the beneficiary is a married woman entitled for her separate use and restrained from anticipation, make such order as to the court seems just for impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee. The rule that a trustee is not to benefit by his office is subject to some exceptions. He may do so if the instrument creating him trustee specially allows him remuneration, as is usually the case where a solicitor is appointed. The main duties of trustees are to place the trust property in a proper state of security, to keep it (if personalty) in safe custody, and to properly invest and distribute it. A trustee must be careful not to place himself in a position where his interest might clash with his duty. As a rule he cannot safely purchase from his cestui que trust while the fiduciary relation exists between them. Investments by trustees demand special notice. The Trustee Act 1893 has consolidated the law on this point, and provides, as it were, a code or charter of investment authorizing trustees, unless expressly forbidden by the instrument (if any) creating the trust, to invest trust funds in various modes, of which the more important are as follows: In any of the parliamentary stocks or public funds or government securities of the United Kingdom; on real or heritable securities in Great Britain or Ireland; in stock of the Bank of England or the Bank of Ireland; in India 3½% stock and India 3% stock; in any securities, the interest of which is for the time being guaranteed by parliament; in consolidated stock created by the London County Council; in the debenture or rent-charge or guaranteed or preference stock of any railway company in Great Britain or Ireland incorporated by special act of parliament, and having during each of the ten years last past before the date of investment paid a dividend at the rate of not less than 3% on its ordinary stock; in the debenture stock of any railway company in India, the interest on which is paid or guaranteed by the secretary of state in council of India; in the “B” annuities of the Eastern Bengal, the East Indian and the Sind, Punjab and Delhi railways; and also in deferred annuities—comprised in the register of holders of annuity Class D, and annuities comprised in the register of annuitants Class C of the East Indian Railway Company; in the stock of any railway company in India upon which a fixed or minimum dividend in sterling is paid or guaranteed by the secretary of state in council of India, or upon the capital of which the interest is so guaranteed; in the debenture or guaranteed or preference stock of any company in Great Britain or Ireland established for the supply of water for profit, and incorporated by special act of parliament or by royal charter, and having during each of the ten years last past before the date of investment paid a dividend of not less than 5% per annum on its ordinary stock; in nominal or inscribed stock issued, or to be issued, by the corporation of any municipal borough having, according to the returns of the last census prior to the date of investment, a population exceeding 50,000; or by any county council under the authority of any act of parliament or provisional order; in any of the stocks, funds or securities for the time being authorized for the investment of cash under the control or subject to the order of the High Court. Trustees may from time to time vary any such investments for others of an authorized nature. The statutory power to invest on real securities does not, of course, authorize the purchase of realty; but by s. 5 of the Trustee Act 1893 a power to invest in real securities (in the absence of express provision to the contrary) authorizes investment on mortgage of leasehold property held for an unexpired term of not less than 200 years and not subject to a greater rent than one shilling a year, or to any right of redemption or condition of re-entry except for non-payment of rent.

The position of trustees in respect of what was frequently an undue personal responsibility for the administration of their trust has been much improved by s. 8 of the Trustee Act 1888 (not repealed by the Trustee Act 1893) and s. 3 of the Judicial Trustees Act 1896. Sub-section (1) of the former enactment (with some omissions) runs as follows: “In any action or other proceeding against a trustee or any person claiming through him, except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use, the following provisions shall apply: (a) All rights and privileges conferred by any statute of limitations shall be enjoyed in the like manner and to the like extent as if the trustee or person claiming through him had not been a trustee or person claiming through him. (b) If the action or other proceeding is brought to recover money or other property, and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit of, and be at liberty to plead the lapse of time as a bar to such action or other proceeding in the like manner and to the like extent as if the claim had been against him in an action of debt for money had and received.” The statutory period of limitation which trustees are thus permitted to plead is the six years fixed as the period of limitation for actions of debt by the Limitation Act 1623. It has been decided on the above section that in the case of a breach of trust consisting of an improper investment of the trust funds, time begins to run in favour of the trustee from the date of the investment. Sub-section (3) of the Judicial Trustees Act 1896 provides that “if it appears to the court that a trustee, whether appointed under that act or not, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the passing of that act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve the trustee either wholly or partly from personal liability for the same.” Owing to the generally reduced rate of interest obtainable for money invested on trust securities, the court has in several instances, and even as against defaulting trustees, charged them with interest at 3% per annum (instead of 4%, which was formerly the recognized rate) upon sums found due from them to the trust estate.

Under the old law trustees could not safely advance on mortgage more than two-thirds of the actual value of agricultural land or one-half of the value of houses. This “two-thirds rule” is now made statutory by s. 8 of the Trustee Act 1893, which enacts that “A trustee lending money on the security of any property on which he can lawfully lend shall not be chargeable with breach of trust by reason only of the proportion borne by the amount of the loan to the value of the property at the time when the loan was made, provided that it appears to the court that in making the loan the trustee was acting upon a report as to the value of the property made by a person whom he reasonably believed to be an able practical surveyor or valuer instructed and employed independently of any owner of the property, whether such surveyor or valuer carried on business in the locality where the property is situate or elsewhere, and that the amount of the loan does not exceed two equal third parts of the value of the property as stated in the report, and that the loan was made under the advice of the surveyor or valuer expressed in the report.” The same section protects trustees for not investigating the lessor's title when lending on the leasehold security, and for taking a shorter title than they might be otherwise entitled to on the purchase or mortgage of any property, if they act with prudence and caution. By s. 9 (replacing s. 5 of the Trustee Act 1888) trustees who commit a breach of trust by lending more than the proper amount on any property are excused from making good any more than the excess of the actual loan over the sum which they might have properly lent in the first instance.

Rights and Duties of the Cestui que Trust.—These may be to a great extent deduced from what has been already said as to the correlative duties and rights of the trustee. The cestui que trust has a general right to the due management of the trust property, to proper accounts and to enjoyment of the profits. He can as a rule only act with the concurrence of the trustee, unless he seeks a remedy against the trustee himself.

Judicial Trustees.—The Judicial Trustees Act 1896, inaugurated a semi-official system of trusteeship which was new in England, but had been known in Scotland for upwards of 150 years. The general scope of the act is indicated by s. 1 (1), which runs as follows: “Where application is made to the court by or on behalf of the person creating or intending to create a trust, or by or on behalf of a trustee or beneficiary, the court may, in its discretion, appoint a person (in this act called a judicial trustee) to be a trustee of that trust, either jointly with any other person or as sole trustee, and if sufficient cause is shown, in place of all or any existing trustees.” The act and the rules made under it (the Judicial Trustees Rules 1897) provide that judicial trustees shall be under the control and supervision of the court as officers thereof, and may be paid for their services out of the trust property. The trust accounts are to be