Co-trustees: Joint Action, Liability and Contribution (Sections 26, 27, 44, 48 and 54)

Many trusts have more than one trustee. Several trustees provide a check on each other and continuity if one dies, but they also raise questions the Act must answer. Must they act together? Is one liable for another's wrongdoing? If both are liable, who ultimately pays? What happens to their powers if one dies? This note gathers the rules on co-trustees, which are spread across Sections 26, 27, 44, 48 and 54.

1. Co-trustees Must Act Together (Section 48)

The default rule is unanimity. Co-trustees hold the property jointly and form one body; decisions on the administration of the trust must be taken by all of them. A sale, a lease, an investment or a receipt executed by fewer than all, without authority in the instrument, is not a valid act of the trust. The rule protects beneficiaries by ensuring that each trustee brings his own judgment to every decision.

• Majority clauses: the instrument may allow decisions by a majority, or delegate defined functions to one trustee. This is common, and essential in larger trusts.
• Ministerial acts: routine acts done in the regular course of business (such as paying a bill already approved) may be done by one trustee as agent for the others, within the limits on delegation in Section 47 (Topic 23).
• Deadlock: where unanimous trustees cannot agree and the instrument provides no mechanism, a trustee may seek the court's direction (Section 34) or, in serious cases, the court may replace a trustee (Section 74).

2. Survival of Powers (Section 44)

Powers are given to trustees as an office, not as individuals. If one co-trustee disclaims or dies, the survivors can still exercise the powers, unless the instrument shows that a particular number must act (for example, "by not fewer than three trustees"). Section 76 states the related rule that on the death of a co-trustee the trust survives to the others (Topic 30).

3. Liability for a Co-trustee's Breach (Section 26)

The starting point is that a trustee is not, merely by being a co-trustee, liable for a breach committed by another. Section 26 states this subject to Sections 13 and 15 (each trustee's own duties to protect the property and take care), and then lists the situations in which he is liable, unless the instrument expressly declares otherwise:

The common thread is that liability arises from the trustee's own default, not vicariously. A trustee who leaves everything to an active co-trustee is liable for the resulting loss, as an illustration to Section 15 also shows. Section 26 adds a narrow protection: a co-trustee who joins in signing a receipt for trust property, and proves that he did not himself receive it, is not answerable merely because of that signature for its loss or misapplication by his co-trustee.

4. Joint and Several Liability (Section 27)

As against the beneficiary, each liable co-trustee is answerable for the whole loss. The beneficiary may sue any one, or all, and recover the full amount from whoever is able to pay. He need not divide his claim or prove each trustee's share of blame. Liability extends both to trustees who jointly commit the breach and to a trustee whose neglect enabled the other's breach.

5. Contribution Between Co-trustees (Section 27)

Section 27 then regulates the position between the trustees themselves, once one of them has paid:

• Unequal guilt: if one trustee is less guilty than another and has had to refund the loss, he may compel the more guilty trustee (or his legal representative, to the extent of assets received) to make good the loss.
• Equal guilt: if all are equally guilty, any trustee who has paid may compel the others to contribute.
• Fraud bars contribution: nothing in the section authorises a trustee who has been guilty of fraud to sue for contribution.

Contribution is therefore a matter of relative fault. A trustee who was merely careless in supervising a co-trustee who stole trust money can recover in full from the thief. Two trustees who jointly made an unauthorised investment share the loss. And a fraudulent trustee bears his liability alone.

6. No Loans Between Co-trustees (Section 54)

Section 54 prevents co-trustees from using trust money to lend to one another. The trustees would be on both sides of the transaction: deciding whether to lend, on what terms, and whether to enforce. It is an application of the general bar on conflicts of interest (Topic 24) to a situation that arises naturally among co-trustees.

7. Related Topics and Provisions

• Breach of trust and liability (Topic 17): Section 23
• No renunciation and no delegation (Topic 23): Section 47
• Fiduciary disabilities (Topic 24): conflicts of interest
• Appointment of new trustees (Topic 30): survival of the trust under Section 76