Specific Relief Act (SRA)
Contracts Connected with Trusts: Section 11
Section 11 deals with contracts that touch a trust. It has two limbs that pull in opposite directions. The first says that where a contract is connected with the performance of a trust, the court may compel performance, because a fiduciary duty is not something money can easily replace. The second protects the beneficiaries: a contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced. This note reads the two limbs together and shows, by example, when performance advances the trust and when it harms it.
Figure: Section 11: a trust obligation can be enforced under sub-section (1), but a trustee's excess of powers or breach of trust bars enforcement under sub-section (2)
1. The Provision
Section 11 in outline ▪ Section 11(1). Except as otherwise provided, a contract may be specifically enforced notwithstanding that it is not one for which compensation in money is not an adequate relief, when the act agreed to be done is in the performance, wholly or partly, of a trust. ▪ Section 11(2). A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced. |
2. Section 11(1): A Trust Obligation Can Be Enforced
When performance advances the trust ▪ The rule. Where a contract is connected with the performance of a trust, the court may specifically enforce it. The trust duty itself supplies the ground for enforcement. ▪ Why. A fiduciary obligation is peculiarly unsuited to a money substitute; carrying out the trust, not paying damages for failing to, is what the beneficiaries are entitled to. ▪ Examples. A trustee selling trust land under an express power of sale; a trustee granting a lease the instrument authorises to raise income for the trust; an executor completing a sale the testator had agreed before death. |
3. Section 11(2): Excess of Powers or Breach of Trust
When performance harms the trust ▪ The bar. A contract made by a trustee cannot be specifically enforced in either of two cases: ▪ (a) In excess of his powers. The trustee had no authority under the trust instrument, or under the general law, to make the contract at all. ▪ (b) In breach of trust. Performance would injure the beneficiaries or defeat the purpose of the trust, for example a sale at an undervalue, or a dealing for a purpose outside the trust. ▪ The reason. The court will not use its coercive power to complete a transaction the trustee had no right to enter. The other party is left to his personal remedies against the trustee, not against the trust estate. |
4. Reading the Two Limbs Together
Situation | Enforceable? | Why |
|---|---|---|
Trustee sells under an express power of sale | Yes | Performance is in furtherance of the trust: s. 11(1) |
Trustee grants an authorised lease for trust income | Yes | The act is done in performance of the trust |
Trustee mortgages trust property with no power to borrow | No | Excess of powers: s. 11(2)(a) |
Trustee sells at an undervalue to a relative | No | Breach of trust, injures the beneficiaries: s. 11(2)(b) |
Trustee contracts to apply trust funds outside the trust | No | Defeats the trust's purpose: s. 11(2) |
5. Section 11 and Section 10 Compared
- Section 10 is the general gateway: it now makes specific performance the rule for contracts generally, subject to the bars.
- Section 11(1) is an enabling provision for a special class: it confirms that a contract in performance of a trust may be enforced even though it would not otherwise attract the remedy.
- Section 11(2) is one of the express bars to which Section 10 is subject: it protects the beneficiaries against a trustee who oversteps or betrays the trust.
6. Frequently Asked Questions
Q. Can a contract connected with a trust be specifically enforced?
A. Yes. Section 11(1) allows the court to enforce a contract where the act agreed to be done is in the performance, wholly or partly, of a trust.
Q. When can a trustee's contract not be enforced?
A. Under Section 11(2), when the trustee made it in excess of his powers, or in breach of trust, that is, in a way that would injure the beneficiaries or defeat the trust.
Q. Who is protected by Section 11(2)?
A. The beneficiaries of the trust. The bar prevents the court from completing a transaction the trustee had no authority to enter or which betrays the trust.
Q. What remedy does the other party have if Section 11(2) applies?
A. He is left to his personal remedies against the trustee, such as damages; he cannot enforce the contract against the trust property.
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