Civil Remedies for Breach of Trust

The Act's remedies for breach of trust are spread across many sections: compensation in Section 23, enforcement in Sections 59 to 62, proprietary claims in Sections 63 to 66 and 88, indemnity and contribution in Sections 27, 33 and 68, and the court's supervisory powers elsewhere. This note brings them together, so that the full range of civil relief available to a beneficiary can be seen in one place, and explains how to choose among them.

1. Personal and Proprietary Remedies

The most important distinction is between personal and proprietary remedies.

Point	Personal remedies	Proprietary remedies
Nature	A claim against the trustee (or another wrongdoer) to pay money	A claim to specific property or a charge over it
Examples	Compensation for loss (Section 23); account of profits; interest	Following and tracing (Section 63); charge on blended funds (Section 66); constructive trust of a fiduciary's gain (Section 88); retransfer of wrongly bought property (Section 62)
Value if defendant insolvent	Ranks with unsecured creditors	Takes priority over unsecured creditors
Increase in value	Limited to the loss or the profit made	Captures any increase in value of the asset
Against third parties	Only against those personally liable	Against anyone holding the property except a bona fide purchaser for value without notice (Sections 64 and 96)

A beneficiary may often pursue both, but cannot recover twice for the same loss. Where the trustee is solvent, a personal claim is simpler; where he is insolvent, or the property has risen in value, a proprietary claim is more valuable.

2. Compensation (Section 23)

The basic remedy is an order that the trustee make good the loss caused by the breach to the trust property or the beneficiary (Topic 17). Points to note:

Restoration: the aim is to put the trust fund where it would have been if the breach had not occurred.
Interest: payable only in the cases listed in Section 23, including simple interest at six per cent (or as the court directs) and compound interest or profits where trust money was used in business.
No set-off: a gain from a distinct breach cannot reduce the liability (Section 24).
Defences: the beneficiary's fraud, concurrence or acquiescence, with full knowledge, bars his own claim (Section 23).
Joint and several liability: each liable co-trustee answers for the whole (Section 27).

3. Account of Profits

Where the trustee has profited from the breach, the beneficiary may require him to account for the profit even if the trust suffered no loss. This follows from Section 51 (no use of trust property for profit), Section 23(f) (profits from trade use, at the beneficiary's option) and Section 88 (advantage gained by a fiduciary held for the beneficiary). An account of profits is particularly useful against fiduciaries who made secret profits or diverted opportunities.

4. Specific Relief

Remedy	Source	Use
Mandatory order to perform a duty	Section 61	Compel accounts, investment, collection, payment of income
Injunction	Section 61; Specific Relief Act, 1963	Restrain a contemplated or probable breach before it happens
Declaration	Section 63; Specific Relief Act, Section 34	Declare property to be trust property
Retransfer or setting aside	Sections 52, 53 and 62	Undo a trustee's purchase of trust property
Execution of the trust by the court	Section 59	Administration suit where there is no trustee or execution is impracticable

5. Protective and Supervisory Remedies

Removal and replacement of trustees (Sections 60, 73 and 74; Topics 29 and 30).
Appointment of a receiver to protect the property pending trial, where the trustee is insolvent, absent, or misapplying funds (Section 60; Order XL, Code of Civil Procedure).
Control of discretion exercised unreasonably or in bad faith (Section 49; Topic 22).
Suspension of powers after a decree in an administration suit (Section 45).

6. Remedies Among the Wrongdoers

Several provisions allocate the burden of a breach among those responsible, once the beneficiary has been compensated:

Contribution between co-trustees according to relative guilt; none for a fraudulent trustee (Section 27).
Indemnity from a non-trustee who gained from the breach, with a charge on a gaining beneficiary's interest (Section 33).
Impounding the interest of a beneficiary who joined in, profited from, concealed or induced the breach (Section 68).

7. Choosing the Remedy

Situation	Best remedy
Breach threatened but not yet committed	Injunction (Section 61)
Trustee holding back accounts or income	Mandatory order (Sections 19 and 61)
Loss caused, trustee solvent	Compensation with interest (Section 23)
Trustee made a profit, no loss	Account of profits (Sections 51 and 88)
Trust property sold to a person with notice or a donee	Following and declaration (Section 63)
Proceeds used to buy an asset that has risen in value	Tracing (Section 63)
Trust money mixed with trustee's own	Charge on whole fund (Section 66)
Trustee insolvent or absconding	Proprietary claims, receiver, removal
Trustee bought trust property	Retransfer (Section 62)

⚠ Note

Civil remedies do not exclude criminal liability. A dishonest misappropriation may also be prosecuted as criminal breach of trust (Topic 38), and the two proceedings may run in parallel. Limitation and procedure for civil claims are discussed in Topic 39.

⚠ Key point

Civil remedies for breach of trust are personal (compensation under Section 23 with interest in listed cases, no set-off, joint and several liability; account of profits under Sections 23(f), 51 and 88) or proprietary (following and tracing under Section 63, a charge on blended funds under Section 66, a constructive trust of a fiduciary's gain under Section 88, retransfer under Section 62), the latter giving priority in insolvency and capturing gains but yielding to bona fide purchasers. Specific relief includes mandatory orders and injunctions (Section 61), declarations and execution by the court (Section 59); protective relief includes removal, a receiver and control of discretion. Contribution, indemnity and impounding allocate the loss among wrongdoers (Sections 27, 33 and 68).

8. Related Topics and Provisions

Breach of trust and liability (Topic 17)
Beneficiary's remedies (Topic 26) and following and tracing (Topic 27)
Criminal breach of trust (Topic 38)
Limitation and procedure (Topic 39)