Keech v Sandford (1726)

Transfer of Property · Duties of a Trustee

Facts.

A trustee held the lease of a market on trust for an infant beneficiary. When the lease came up for renewal, the lessor refused to renew it for the benefit of the infant. The trustee then took a renewal of the lease for himself.

Issue.

May a trustee keep for himself a benefit — the renewed lease — that came to him through his position as trustee, even where the beneficiary could not himself have obtained it?

Held.

Lord King LC held that the trustee must hold the renewed lease on trust for the infant and account for the profits. A trustee may not profit from his position — even though, here, the infant could not have had the lease. “This may seem hard, that the trustee is the only person of all mankind who might not have the lease; but it is very proper that the rule should be strictly pursued.”

Why it matters.

It is the fountain-head of the no-profit / no-conflict rule that runs through the trustee’s disabilities (ss.51–54 of the Indian Trusts Act) — a trustee’s gains from the trust are held for the beneficiary.

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