TRUSTEE. A trustee is the person to whom property is intrusted in order that he may deal with it in accordance with the directions given by the creator of the trust. The person for whose benefit a trust is created is called the cestui que trust (plural, cestuis que trustent).
A trustee must take as much care of the trust property as a reasonable business man would of his own property.
Bankers avoid, as far as possible, opening accounts which give specific notice of a trust. But if John Brown and John Jones come to a banker with a request to open an account as " Trustees of R. Smith, J. Brown, J. Jones," and the banker recommends, with the idea of avoiding notice of trust, that the account should be called " John Brown and John Jones re R. Smith," the banker could hardly maintain, in the event of any subsequent trouble, that he was unaware that it was a trust account. As a matter of fact, accounts frequently are, by the express wish of cus tomers, opened with a direct reference to a trust. When this is so the banker must be careful to see that every cheque is signed by all the parties who held themselves out to be trustees when the account was opened. It is not customary to inquire if the names in which the account is opened are all the trustees who were appointed in the will or trust deed. Trustees cannot delegate their authority and appoint one or more of their number to sign cheques, unless the trust deed gives them power to do so, and before accepting such an authority a banker should require to see the deed of appointment.
Trustees frequently give authorities to the various companies in which stocks and shares are held to pay the dividends thereon direct to their bankers for credit of the trustees' account. This avoids the difficulty which would otherwise arise of one trustee receiving the dividends on behalf of himself and his co-trustees.
The credit balance of an account in the name of " John Brown in trust for J. Jones," (or any similar wording notice of a trust), could not be held by a banker as a set off for an overdraft on John Brown's private account ; neither could a banker successfully hold to an amount transferred wrongfully by John Brown from the trust account to satisfy any pressing demands of the banker for a reduction of John Brown's overdraft. A transaction of that natur would give such a plain indication of irregu larity that no banker would be justified in accepting money from that source. But a banker could hold a balance on, say, a No. 2 account as a set off to the customer's over drawn No. 1 account, even if the moneys in
the No. 2 account should ultimately be proved to be trust moneys, so long as the banker had no knowledge of the fact.
In Ex pesrte Kingston (1871, 6 Ch. 632), Lord Justice Mellish said : " We are not really doing any prejudice to bankers by establishing a rule that if an account is in plain terms headed in such a way that a banker cannot fail to know it to be a trust account, the balance standing to the credit of that account will, on the bankruptcy of the person who kept it, belong to the trust." The bankruptcy of a trustee does not affect his rights to deal with the trust funds.
A banker must not be a party to a breach of trust. It has been held that if it is shown that a personal benefit to the banker is stipu lated for, it will most readily establish the fact that the banker is in privity with the breach of trust.
Moneys belonging to clients and paid in to the credit of sharebrokers' or solicitors' accounts do not fix a banker with notice of a trust. Heber Hart says (" Law of Bank ing," p. 159) " Where a solicitor keeps two accounts with a banker, one under the head office account,' and another under the head ' private account,' this does not amount to notice to the banker that moneys standing to the former are trust moneys, or even put the banker upon inquiry." With regard to securities deposited by trustees for safe custody it has been held that trustees are perfectly justified in depositing bonds payable to bearer with bankers in order that the coupons may be cut off when due and collected. Securities deposited by trustees must not be given up except under the authority of all the trustees. (See SAFE CUSTODY.) If bearer bonds are lodged by a customer as security for an overdraft, and it ultimately transpires that the bonds do not belong to the customer but to a trust, the banker's right to the security will not be affected, pro vided that when he took the bonds he was in complete ignorance that they belonged to a trust. If instead of a negotiable security, as bearer bonds, the customer deposited a certi ficate of shares registered in his own name, along with a memorandum of deposit or a blank transfer, and the shares are eventually proved to belong to a trust, the banker will not be able to retain the security. To avoid such an unfortunate position and to have a complete security a banker should, when tak ing certificates, have the stock or shares registered in his own name or the names of his nominees.