Proof in the trustee's

7. A trustee is only liable as on a simple contract and not as on a specialty. He is only liable as on a specialty if he would be liable on a specialty at law. E.g., if a trustee has covenanted by deed to apply trust money in a particular way, and then misapplies it, the amount due from him in respect of the misapplication is a specialty debt (q).

8. Where several trustees have committed a breach of trust, each of them is severally liable for the whole amount for which the cestui que trust is entitled to sue. There is no joint liability as distinct from the several liability, except where the liability for a breach of trust can be enforced against a partnership and a joint estate (r).

A cestui que trust is entitled to prove in bankruptcy in bankruptcy. respect of a breach of trust committed by his trustee ; and he is entitled to prove for the amount which he could recover in a suit for an account (s). The Bankruptcy Act, 1883 (t), avoids as a fraudulent preference a transfer or payment made by an insolvent debtor "in favour of any creditor" within a prescribed time before his bankruptcy. It has been laid down in various cases that a repayment by a trustee to his cestui que trust or co-trustee of trust money which he has misappropriated is not a fraudulent preference although the repayment is made under circumstances which, as between a debtor and his creditor, would constitute a fraudulent preference (u). A cestui que trust, say these authorities, is not a creditor of his trustee, nor is one trustee a creditor of another trustee. It is true that the misappropriation of trust money by a trustee never gave a legal

(g) Adey v. Arnold (1852), 2 D. M. & G. 432; Holland v. Holland (1869), 4 Ch. 449. The observations of Lord CRANWORTH in Lockkart v. Reilly (1857), 1 De G. & J. 464, are rather loosely expressed, but do not conflict with the above decisions.

(r) Ex parte Adamson (1878), 8 Ch. D. 807, p. 820.

(s) Ex parte Adamson (1878), 8 Ch. D. 807, p. 819; Emma Silver Mining Co. v. Grant (1880), 17 Ch. D. 122, p. 130; In re Parkes (1887), 19 Q. B. D. 84.

(t) Section 48.

(u) Sinclair v. Wilson (1855), 20 B. 324, per ROMILLY, M.R.; Ex parte Stubbins (1881), 17 Ch. D. 58, p. 69, per JAMES, L.J.; Ex parte Taylor (1886), 18 Q. B. D. 295, p. 301, per LINDLEY, L.J. See also In re Blackpool Motor Car Co., [1901] 1 Ch. 77, p. 85, and per RIGBY, L.J., in In re Lake, [1901] 1 Q. B. 710, p. 715.

cause of action to the cestui que trust, but it entitled the cestui que trust to bring a suit for an account in equity, and as the amount found due on taking the account might be proved in bankruptcy, it appears only reasonable to hold that the Act includes in the word "creditor" a person haxing an equitable claim for the payment of money which might be enforced by suit in equity or by proof in bankruptcy. In accordance with this view it is laid down both by Lord Justice JAMES (x) and by Lord HALSBURY (y) that if a trustee commits a breach of trust by misappropriating trust money, his cestui que trust is a creditor within the provision against fraudulent preference in respect of the money misappropriated (2).

remedies of

A cestui que trust, in pursuing his personal remedy, has Ancillary two ancillary remedies. (1.) He has a lien upon property the cestui purchased by the trustee with trust funds in breach of que trust. trust (a). If a trustee makes an unauthorised investment, and the cestui que trust elects to treat the investment as a breach of trust, the cestui que trust is entitled to a lien on the investment for the amount of trust funds invested; and he can enforce his lien by sale. But he must give the trustee the option of redeeming, i.e., of taking to the investment on the terms of making up for the breach of trust, The cestui que trust cannot sell without the concurrence of the trustee. The sale of an unauthorised investment by the cestui que trust without giving notice to his trustee is equivalent to an adoption of the investment as belonging to the trust and disentitles him to any further remedy against the trustee (b). On the other hand, where the investment is a breach of trust not as being unauthorised, but as being improvident, there the investment is part of the trust. The cestui que trust, strictly speaking, has not a lien upon it; it is his absolutely. He is not required to exercise the

(x) Ex parte Kelly & Co. (1879), 11 Ch. D. 306. (y) Sharp v. Jackson, [1899] A. C. 419, p. 426.

(z) The language of LINDLEY and FRY, L.JJ., in Webb v. Stenton (1883), 11 Q. B. D. 518, is to the same effect, pp. 526, 530.

(a) Mant v. Leith (1852), 15 B. 524; Ex parte Norris (1869), 4 Ch. 280.

(b) Thornton v. Stokill (1855), 1 Jur. (N.s.) 751.

Limitations

on the cestui que trust's remedies.

option of rejecting or accepting it. He can either retain the investment or he can sell it without giving notice to the trustee and make the trustee account for the difference between the value of the investment and the amount of trust funds misapplied. The trustee has no absolute right to take the investment on paying the amount invested in it (c). (2.) The cestui que trust also has a right to insist that the trustee shall not receive any interest to which he is entitled in the trust property until he has made good the breach of trust (d). The court treats the trustee as having received his share by anticipation. The principle applies not merely to interests which the trustee takes in the first instance but also to derivative interests, e.g., an interest which the trustee takes as next-of-kin of an intestate beneficiary (e), or an interest which he acquires by purchase (ƒ).

The loss of equitable remedies is dealt with at large hereafter. Two points, however, which affect the remedies of the cestui que trust as against his trustee may be considered now: (1) the effect of s. 3 of the Judicial Trustees Act, 1896 (g), and (2) the effect of acquiescence by a cestui que trust in a breach of trust. (1) The Judicial Trustees Act, 1896, provides (h): If it appears to the court that a trustee, whether appointed under this 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 this 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. The dispensing power given

(c) In re Salmon (1889), 42 Ch. D. 351.

(d) In re Brown (1886), 32 Ch. D. 597; In re Weston, [1900] 2 Ch. 164. (e) Jacubs v. Rylance (1874), 17 Eq. 341.

(f) Doering v. Doering (1889), 42 Ch. D. 203.

(g) 59 & 60 Vict. c. 35.

(h) Section 3 (1).

to the court by this section has been frequently exercised (i). (2) A cestui que trust who concurs or acquiesces in a breach of trust cannot obtain any relief against his trustee in respect of it (k). It is immaterial that the cestui que trust has himself derived no benefit from the breach of trust. A person who instigates a breach of trust cannot, if he himself subsequently becomes a beneficiary, compel the trustee to make good the loss occasioned by such breach. He has no rights against the trustee, even though, when the breach of trust was committed, he did not know that he was interested in the trust property, or that the act which he instigated was a breach of trust (). Where one of two trustees is himself a cestui que trust he cannot call on the other to replace stock which they have both permitted to be misapplied (m).

(i) The most important cases are In re Turner, [1897] 1 Ch. 536; In re Kay, [18972 Ch. 518; In re Stuart, [1897] 2 Ch. 583; In re Grindey, [1898] 2 Ch. 593; Perrins v. Bellamy, [1899] 1 Ch. 797; In re Lord de Clifford's Estate, [1900] 2 Ch. 707; Chapman v. Browne, [1902] 1 Ch. 785, p. 804.

(k) Brice v. Stokes (1805), 11 Ves. 319, p. 326; Walker v. Symonds (1819), 3 Swans. 1, p. 64; Maitland's Case (1853), 4 D. M. & G. 769, p. 779; Burrows v. Walls (1855), 5 D. M. & G. 232, p. 251; Farrant v. Blanchford (1863), 1 D. J. & S. 107.

(1) Evans v. Benyon (1887), 37 Ch. D. 329.

(m) Butler v. Carter (1868), 5 Eq. 276, p. 281.

Trustee Act, 1893, s. 24.

CHAPTER X.

RESPONSIBILITY OF TRUSTEES FOR AGENTS
AND CO-TRUSTEES.

THE Trustee Act, 1893, provides (a) that a trustee shall, without prejudice to the provisions of the instrument, if any, creating the trust, be chargeable only for money and securities actually received by him notwithstanding his signing any receipt for the sake of conformity, and shall be answerable and accountable only for his own acts, receipts, neglects, or defaults, and not for those of any other trustee, nor for any banker, broker, or other person with whom any trust moneys or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss, unless the same happens through his own wilful default. This section reproduces the common indemnity clause which was usually inserted in trust deeds, and neither that clause nor the enactment appears to make any substantial alteration in the liability of trustees from what it would be under the general law (b). Under the enactment, as well as apart from it, a trustee is liable for his actual receipts, and receipts by an agent appointed to collect trust funds are actual receipts by the trustee. Under the enactment, as well as apart from it, a trustee is liable for a loss which has occurred through his own wilful default; and failure to supervise the acts of a co-trustee is wilful default within the meaning of the Act.

RESPONSIBILITY FOR AGENTS.

A trustee is responsible for his actual receipts, and every receipt by an agent appointed by the trustee to collect trust funds is an actual receipt by the trustee, for which he is chargeable in taking the common account. If a trustee

(a) Section 24.

(b) Lewin on Trusts, 10th ed., p. 295.