Report No. 17
20. Section 10.-
The first paragraph of section 10 consists of two parts. The first part lays down that every person capable of holding property may be a trustee. If the section stops there, minors, lunatics and people of unsound mind who are not competent to contract may also be proper trustees as they are persons capable of holding property. Several difficulties will arise if such persons are qualified to be trustees, as the office of a trustee requires the exercise of discretion and judgment in various matters relating to the administration of the trust.
The section, therefore, in the second part proceeds to draw a distinction between acts which involve the exercise of discretion and acts which do not so involve. In the former case, it is provided that a person who is not competent to contract cannot be a trustee. In other cases, it is permissible to have a person who is either a minor or an idiot or a lunatic as a trustee. It is very difficult to draw the line of distinction between matters of purely ministerial character involving no exercise of discretion or judgment and matters which involve exercise of discretion and judgment. Further, a person appointed as trustee has to choose whether to accept or refuse to accept the office.
This is also an act involving exercise of discretion. Until there is a valid acceptance by him he cannot act. The trust cannot function. To permit, therefore, a person incompetent to contract to be a trustee would be to create serious difficulties and deadlock in the administration of trust. In England, by section 20 of the Law of Property Act, 1925, it was provided that the appointment of an infant to be a trustee in relation to any settlement or trust shall be void but without prejudice to the power to appoint a new trustee to fill the vacancy. This provision has to be read with section 36 of the Trustee Act, 1925 which provides the machinery for filling up the vacancy. Lewin1 is strongly against the appointment of infants as trustees. Lunatics or idiots also stand on the same footing.
It is, therefore, suggested that without drawing a distinction between acts which require exercise of discretion and acts which do not it will be better to alter the law by providing, that (while every person capable of holding property may be a trustee), if a person incompetent to contract is appointed to be a trustee, he should not be permitted to execute the trust until the disability ceases and he accepts the trust. Section 10 should be amended accordingly, and to save the trustee's rights, section 73 may be amended to authorise the court to appoint another person to be a trustee in his place until the disability ceases and he accepts the trust.
1. Lewin on Trusts, (15th Edn.), p. 29.
21. Another suggestion that has been made with reference to this section is, that express provision should be made making 'corporations' eligible for appointment as trustees. We think that that is unnecessary, as the word "person" includes a corporation, and the objection that to repose confidence a conscience is required and that the corporation has not such a conscience, has long been forgotten in English law and corporations were made eligible or appointment as trustees.