TORT 108 Tort Crime Breach of Contract and Breach of Trust The Four Distinctions — Law of Torts Notes for Judiciary

Tort, Crime, Breach of Contract and Breach of Trust: The Four Classical Distinctions

Each of these is a wrong for which the law gives a remedy, and they are told apart by three questions: who fixed the duty that was broken, to whom it was owed, and what the proceeding is for. A tort duty is fixed by the law and owed to persons generally; a criminal duty is fixed by the law and owed to the public; a contractual duty is fixed by the parties and owed to the other party; and a trustee's duty is fixed by equity and owed to a determinate beneficiary. Breach of trust is the odd one out, because alone among them it asks not what the defendant did but what happened to the property.

The four wrongs compared, why breach of trust is different, and what follows for pleading

1. Tort and Crime

	Tort	Crime
The wrong	Against an individual, and a violation of a private right	Against the public at large, and a violation of a public duty
Who proceeds	The person injured, by suit	The State, by prosecution
The object	Compensation	Punishment and deterrence
The standard of proof	The balance of probabilities	Beyond reasonable doubt
Compromise	A tort may freely be compromised	Only if the offence is compoundable
Mental element	Generally irrelevant to liability	Mens rea is ordinarily essential
The result	Damages, injunction or restitution	Imprisonment, fine or another sentence

The same act is frequently both: assault, battery, false imprisonment, defamation, conversion, trespass and deceit all have criminal counterparts.
The two proceedings are independent and neither concludes the other. An acquittal does not bar a tort claim, because the standards of proof differ; a conviction is admissible in the civil proceeding but not conclusive.
The subject is examined fully in TORT 101, together with compensation to a crime victim under sections 395 and 396 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

2. Tort and Breach of Contract

	Tort	Breach of contract
The source of the duty	Imposed by the law	Fixed by the parties themselves, by agreement
To whom it is owed	To persons generally, or to a class	To the other contracting party alone
Consent	Irrelevant to the existence of the duty	The whole foundation of the duty
Privity	A duty may be owed to a person the defendant has never met	Only a party may sue upon the contract
The measure of damages	Restitutio in integrum: to the position before the wrong	Expectation: to the position performance would have produced
Liquidated damages	Never. Damages are always assessed by the court	The parties may fix them in advance
Remoteness	The Wagon Mound: damage of a foreseeable kind, judged at the time of the breach	Hadley v. Baxendale: loss arising naturally or in the contemplation of the parties, judged at the time of contracting
Limitation	Runs from when the damage occurs	Runs from the breach

The two are not mutually exclusive. Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145 holds that the law of tort is the general law out of which the parties may contract, and that a duty founded on an assumption of responsibility may exist concurrently with a contractual one.
Where they coexist the plaintiff may choose the more advantageous remedy, subject to the court enquiring whether the tortious liability is excluded because the contract is inconsistent with it.
The subject is examined fully in TORT 100.

3. Tort and Breach of Trust

	Tort	Breach of trust
The source of the duty	The law	Equity, operating on the conscience of the trustee
To whom it is owed	Persons generally, or a class	The beneficiary, a determinate person
What the proceeding is for	To compensate the plaintiff for his loss	To restore the trust property or its value to the fund
The measure	The plaintiff's loss	Measured by the loss to the trust, and the trustee must account for profits he made
Can the defendant's gain be recovered	Only exceptionally, by restitutionary damages	Yes, as a matter of course. The trustee accounts
Tracing	Not available	The beneficiary may follow the property into whatever it has become
Damages	Unliquidated and assessed	The remedy is restitution of the fund, an account, or a constructive trust
Limitation	Runs in the ordinary way under the Schedule	Does not run at all against a fraudulent trustee, or in respect of trust property still in his hands

4. Why Breach of Trust Is the Odd One Out

Tort, crime and contract all ask what the defendant did, and measure the response by the harm his conduct caused. Breach of trust asks a different question: what happened to the property.
That single difference explains every distinctive feature of the remedy.
The trustee must account, so a profit he made is recoverable although the beneficiary lost nothing at all. In tort a defendant who gains without causing loss ordinarily pays nothing.
The beneficiary may trace, following the trust money into the asset it bought and taking that instead. No tort gives a claimant a proprietary claim to what the defendant purchased with the proceeds of the wrong.
The measure is restoration of the fund rather than compensation for consequential loss, so the rules of remoteness and of mitigation that govern tort do not apply in the same way.
Limitation does not protect a fraudulent trustee, nor does it run in respect of trust property still in his hands, because a person holding what is not his cannot acquire a title to it by the mere passage of time.
The obligation is fiduciary and not merely careful. A trustee owes loyalty: he must not place himself in a position where his interest conflicts with his duty, and he must not profit from his position, whether or not the trust was harmed.

5. Where the Indian Trusts Act Fits

The Indian Trusts Act, 1882 codifies the duties of a trustee and the consequences of their breach for private trusts.
The trustee's duties include executing the trust, acquainting himself with the state of the trust property, protecting the title to it, not setting up a title adverse to the beneficiary, dealing with the property as carefully as a man of ordinary prudence would deal with his own, converting perishable property, being impartial among beneficiaries, preventing waste, keeping accounts, and investing only in the authorised securities.
Where a trustee commits a breach of trust he is liable to make good the loss which the trust property or the beneficiary has sustained thereby, unless the beneficiary has by fraud induced the breach, or has concurred in it with full knowledge, or has subsequently released the trustee.
A trustee may not set off a gain in one breach against a loss in another.
And the beneficiary's rights follow the property, which is the basis of tracing.

6. When One Act Is Several Wrongs

The facts	The wrongs committed
A solicitor misappropriates client money	A breach of trust; the tort of conversion; a breach of the contract of retainer; and the offence of criminal breach of trust
A carrier damages goods in transit	A breach of the contract of carriage; and the tort of negligence
A doctor operates without consent	The tort of battery; a breach of the contract of treatment; and an offence of voluntarily causing hurt
An employee takes his employer's stock	The tort of conversion; a breach of the contract of employment; a breach of the fiduciary duty owed by an employee in a position of trust; and the offence of theft or criminal breach of trust
A director diverts a corporate opportunity	A breach of fiduciary duty; the tort of inducing breach of contract where a contract was procured away; and, where the facts support it, an offence

7. Why It Matters Which Is Pleaded

Limitation differs, and may run from different dates or, against a fraudulent trustee, not at all.
The measure differs, and the largest recovery is not always in the obvious claim. Where the defendant profited handsomely and the plaintiff lost little, the trust claim may be worth many times the tort claim.
Privity confines the contractual claim and does not confine the tortious one.
The defences differ. Contributory negligence reduces a tort claim and does not touch a strict contractual obligation; acquiescence and release operate against a beneficiary in ways they do not against a tort claimant.
Tracing is available only to the beneficiary of a trust, and is frequently the only route to a solvent recovery where the wrongdoer has dissipated what he took.
The forum and the court fee may differ, and a claim framed as one wrong may be refused by a forum competent to hear another.

⚠ The practical rule for pleading

Where one set of facts supports more than one of these claims, they should be pleaded in the alternative and particularised separately. For each, the pleading must identify the duty relied on and its source, the breach, the loss, the measure claimed, and the limitation article under which the claim is brought. The commonest and most expensive drafting error in this area is a plaint that runs the claims together, asserts a duty of care rather than establishing how it arose, relies on a contract without setting out the term broken, alleges breach of trust without identifying the trust, and claims a single global sum without saying which basis it rests on. A defendant meeting such a pleading will attack it on every front at once, and the plaintiff will discover, usually after limitation has run, that the alternative he neglected to particularise was the one that would have succeeded.

8. The Position Stated Shortly

1. The four wrongs are told apart by who fixed the duty, to whom it was owed, and what the proceeding is for.

2. A tort duty is fixed by the law and owed to persons generally; the object is compensation and the standard of proof the balance of probabilities.

3. A crime is a wrong against the public, prosecuted by the State, punished rather than compensated, and proved beyond reasonable doubt.

4. A contractual duty is fixed by the parties, owed to the other party alone, and gives expectation damages with Hadley v. Baxendale remoteness.

5. Tort and contract are not mutually exclusive: Henderson v. Merrett Syndicates permits concurrent liability and allows the plaintiff to choose.

6. A trustee's duty is fixed by equity, owed to a determinate beneficiary, and the object is restoration of the trust property.

7. Breach of trust is different because it asks what happened to the property, and that explains the account of profits, tracing, and the treatment of limitation.

8. A trustee must account for profits though the beneficiary lost nothing, and limitation does not run against a fraudulent trustee.

9. One set of facts may constitute several of these wrongs at once, as where a solicitor misappropriates client money.

10. Limitation, measure, privity, defences, tracing and forum all differ, so the claims must be pleaded in the alternative and particularised separately.