CH. II.

Are cestuis que trustent barred at

same time

as their

trustees?

Questions frequently arise as to how far the rights of PART IV. persons beneficially entitled to choses in action are affected by the Statutes of Limitations, and whether, when the right of their trustees to sue at law is barred, they are barred also. The solution of these questions seems to depend on whether, apart from the operation of the statutes, the persons beneficially interested, have a direct remedy in equity against the person liable to pay or are merely entitled to the benefit of the legal remedy of the trustees. Where a settlor covenants to pay, or gives a bond for money to trustees to be held on certain trusts, it is clear (1), though Wood, V.-C., at one time expressed a contrary opinion (2), that the cestuis que trustent have a direct equitable remedy against the settlor besides their right to the benefit of an action on the covenant by their trustees. It would seem also to be settled that if trust moneys be improperly advanced to a cestui que trust under a power in a settlement (3), or advanced to and knowingly received by a person in such a way as to be a breach of trust (4), the person to whom the trust moneys are so advanced is not only liable as an ordinary debtor at law, but becomes a debtor clothed with such a fiduciary character as to render himself liable in equity to be sued for the recovery of the moneys by the persons beneficially entitled. In like manner, where trustees paid by mistake to one of the cestuis que trustent a larger share of the trust funds than he was entitled to under the trusts, he was held liable at the suit of other cestuis que trustent to refund the sum paid to him in excess, although the trustees could recover it by an action at law (5). So also it would seem that if a person, who is

(1) Burrowes v. Gore, 6 H. L. 907; 4 Jur. N. S. 1245. (2) Spickernell v. Hotham, Kay, 675.

(3) Coxwell v. Franklinski, 11 L. T. N. S. 153; Jenner v. Akerman, 10 Jur. N. S. 465; and see Spickernell v. Hotham, Kay, 676.

(4) Ernest v. Croysdill, 2 De G. F. & J. 175, 198; and see Spickernell v. Hotham, Kay, 676.

(5) Harris v. Harris (No. 2), 29 Beav. 110.

CH. II.

PART IV. under a legal obligation to pay moneys which he knows to be trust moneys, deals with them in such a way that the cestuis que trustent cannot have the benefit of them, he will by such dealing render himself liable to be sued in equity (1). Thus, although the remedy of a customer against a banker for money deposited is by action at law only (2), still, where a sum of money was standing to the credit of trustees in the books of bankers, who had notice of the trust, and the bankers by an arrangement made at their own suggestion with the husband of the tenant for life of the trust fund transferred part of it to his account and thereby obtained payment of a debt due from him to the bank, it was held that the bankers were liable in equity to replace the money (3).

It seems clear from all the cases that have been decided on this subject that the only ground on which cestuis que trustent are allowed a direct remedy against a person who is under a legal obligation to pay trust money is either that such person is a party to the trust, or privy to a breach of trust. Therefore, where neither of these grounds exists, the only remedy of the cestuis que trustent against such person is by action brought in the name of the trustees; and when the right of the trustees to bring such an action is barred by statute, the cestuis que trustent are necessarily without remedy against such person, whatever their remedy may be against the trustees themselves. Although, however, it is clear that in some cases persons beneficially entitled to choses in action have a direct remedy in equity against the debtor, it does not follow that the Statutes of Limitations have no application in such cases. This would depend on the further question whether the relation between the cestui que trust and the debtor is such as merely to give the latter

(1) See judgment of Lord Wensleydale in Burrowes v. Gore, 6 H. L. 967; 4 Jur. N. S. 1256; and see Cresswell v. Dewell, 4 Giff. 460. (2) Foley v. Hill, 2 H. L. 28.

(3) Bridgman v. Gill, 24 Beav. 302.

a remedy analogous to some legal remedy, or whether it PART IV. is of such a fiduciary nature as to exclude the operation

of the statute altogether.

CH. II.

In the case of a settlor covenanting to pay money Covenant upon trusts, although Chelmsford, L.C. (1), and Lord to settle. Cranworth (2) were of opinion that the statute had no application, Lord St. Leonards was strongly of opinion the other way (3), and to this extent Lord Wensleydale (4) certainly agreed with him. As in such cases there never has been an existing trust fund on which the trusts could be impressed (5), the equitable right is founded on the principle that the settlement is regarded in equity as a contract entered into between the settlor on the one side and all persons claiming under the settlement on the other, and is nothing more than an equitable right to recover the money analogous to the right of the trustees to sue for it at law. In the case of Stone v. Stone (6), where the children of the settlor who were entitled in remainder after his death brought in a claim in the administration of his estate for a sum of money which the settlor had covenanted to pay to a trustee, Giffard, L.J., affirming James, V.-C., on this point, held that the obligation on the part of the settlor was a purely legal one, and that the statute was a bar to the claim. In this case it seems to have been assumed without argument that the remedy of the cestui que trust was barred at the same time as that of the trustee (7).

Where the equitable liability is founded solely on the person charged being privy to a breach of trust, he might perhaps be thought to fall rather within the class

(1) Burrowes v. Gore, 6 H. L. 940; 4 Jur. N. S. 1250.

(2) Ib. 6 H. L. 945; 4 Jur. N. S. 1251.

(3) Burrowes v. Gore, 6 H. L. 950; 4 Jur. N. S. 1252.

(4) 1b. 6 H. L. 965; 4 Jur. N. S. 1255.

(5) See Spickernell v. Hotham, Kay, 675; and Stone v. Stone, L. R.

5 Ch. 74.

(6) L. R. 5 Ch. 74.

(7) See The Trustee Act, 1888 (51 & 52 Vict. c. 59), s. 8, subs. 1 (b).

CH. II.

PART IV. of constructive trustees who are not excluded from the benefit of the statute than within that of express trustees who cannot avail themselves of it. In some of the cases referred to above the point was not material, as it appeared that the cestuis que trustent themselves, owing to infancy or other circumstances, would not have been barred even if the statute could have been set up against them. However, it seems to have been considered in all these cases, except that of a settlor covenanting to pay upon trusts, that the statute had no application. In Bridgman v. Gill (1), above referred to, it was held by Romilly, M.R., that, as the cestuis que trustent could sue in equity, not only could the trustees do so, as representing their cestuis que trustent, but that the statute was also inapplicable as against the trustees; but it is by no means clear that this would have been held in all the cases referred to. However, Wood, V.-C., appears to have acted on the same principle in Spickernell v. Hotham (2), when the question arose on a claim brought in by the trustees in a suit for the administration of the estate of the persons to whom they had advanced the money.

Trust fund lent to tenant for life.

With regard to these questions, which frequently occur where trust moneys are advanced to a tenant for life of the fund, another consideration sometimes arises, namely, whether, as the tenant for life is the person to pay the interest to the trustees and to receive it back from them, the statute can possibly begin to run during his life, as there is the same hand to pay and to receive interest. It seems settled that in equity time will not run in such a case (3) except where there has never been a trust fund actually in existence; as, for instance, where the person entitled as tenant for life had as settlor covenanted to (1) 24 Beav. 302.

(2) Kay, 676.

(3) Mills v. Borthwick, 35 L. J. Ch. 31; 11 Jur. N. S. 558; and see Jenner v. Akerman, 10 Jur. N. S. 465; Topham v. Booth, 35 Ch. D. 607.

CH. II.

pay the money and had never done so (1). This PART IV. question, as was mentioned above (2), seems to depend on whether the whole transaction amounts to a constructive payment of interest. It is believed that the question has never been raised at law, but it is clear from the cases that the principle is applicable when the claim is brought in by the trustees themselves in an administration action.

If a trustee has been guilty of a breach of trust as to which no protection is afforded by the Trustee Act, 1888, the statute will not run even after his death against the claim of the cestui que trust on the trustee's estate (3). The contrary was formerly held in Ireland (4), but the decisions to that effect have been overruled (5).

Liability of estate.

trustee's

ance inter

It remains to be seen how the creation of a trust for the payment of debts affects the operation of the statutes on claims already in existence. It is not every transfer of Conveyproperty to trustees for payment of debts which invests vivos to the creditors with the character of cestuis que trustent. pay debts. Such a transfer by a debtor in his life-time, without the concurrence of the creditors, gives them no right to enforce the execution of the trusts, but operates merely as a direction to the trustees, pointing out the way in which they are to apply the property vested in them for the benefit of the debtor who alone stands towards them in the relation of cestui que trust (6). Therefore a trans

(1) Spickernell v. Hotham, Kay, 673.

(2) Part I. Ch. V. p. 115.

(3) Obee v. Bishop, 1 De G. F. & J. 137; Story v. Gape, 2 Jur. N. S. 706; Coxwell v. Franklinski, 11 L. T. N. S. 154; Woodhouse v. Woodhouse, L. R. 8 Eq. 514; Brittlebank v. Goodwin, L. R. 5 Eq. 545; In re Burge, Gillard v. Lawrenson, 57 L. T. 364; In re Blake; Blake v. Power, 60 L. T. 663.

(4) Dunne v. Doran, 13 Ir. Eq. R. 545; Brereton v. Hutchinson, 3 Ir. Ch. R. 361; Newport v. Bryan, 5 Ir. Ch. R. 119.

(5) See Carroll v. Hargrave, 5 Ir. Rep. Eq. 548; Smith v. Cork and Bandon Railway Co. 5 Ir. Rep. Eq. 76.

(6) Garrard v. Lauderdale, 3 Sim. 1; 2 Russ. & My. 451; Henriques v. Bensusan, 20 W. R. 351; In re Sanders' Trusts, 47 L. J. Ch. 667; Johns v. James, 8 Ch. D. 744. See 1 White & Tudor, L. C. 6th ed. 303.