Muhammad Mudassar Sharif

21090099

Equity: Specific Relief & Trusts

May 4, 2020

A trustee uses rupees one lac of the trust funds to buy prize bonds and wins rupees fifty lac from
some bonds that turn out to be the winning bonds. He reimburses the trust funds for the rupees one
lac that he had taken out wrongfully. When the beneficiaries learn about this they demand that the
amount of Rupees fifty lac should also be transferred into the trust funds. On the other hand, the
trustee claims that he had transferred back the rupees one lac and that the trust had suffered no
loss because of his acts. Whose position do you support, and give reasons for you answer.

As the trustee was holding the money of beneficiaries in trust; he, in no interpretation of law,
could be entitled to use that money for his own benefit. In this case he did it without the knowledge and
consent of the beneficiaries. A trustee is under a fiduciary obligation to take care of the trust, and his use
of trust’s money was against the moral obligation due in the trust.

It is a well settled principle that a trustee cannot benefit from the trust, and taking any personnel
benefit from the trust comes under the ambit of conflict of trust. The Trust Act of 1882 deals with such
circumstances, and it clearly prohibits the use of property of trust by the trustee for his personnel benefit.
Section 88 of this act provides that ‘where a trustee, executor, partner, agent, director of a company, legal
adviser, or other person bound in a fiduciary character to protect the interests of another person, by
availing himself of his character, gains for himself any pecuniary advantage, or where any person so
bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to
those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the
benefit of such other person the advantage so gained.’ Which means that if a trustee who owes a fiduciary
duty to the beneficiaries gains a personnel profit from such a trust, it may be deemed that the trustee holds
such profit for the benefit of the beneficiaries. If we follow this reasoning we can conclude that in this
case, since the trustee won the prize bond from the trust money of the beneficiaries, he holds this prize
money for the benefit of the beneficiaries according to the law and established principles of equity.

Thus, the beneficiaries are right in their demand of the prize money of fifty lac rupees, as the
trustee holds this money for the benefit of beneficiaries according to the law, as well as the established
principles of equity.