Breach of Trust: Remedies for Beneficiaries

What counts as a breach of trust in Mauritius

A breach of trust is any failure by a trustee to carry out the trust as the deed and the law require. It may be an act (a payment the deed does not allow) or an omission (accounts never kept, a decision never taken). Intent is not always needed: an honest mistake can still cause loss that the trustee has to answer for.

Whether a given act is a breach depends on the wording of the deed, the governing law and the facts. This page is general information, not advice. For a real dispute, the analysis belongs with a lawyer who has the documents in front of them. The full list of what a trustee must do is set out in duties of a trustee toward the family; here the focus is on what happens when those duties are not met.

The framework is the Trusts Act 2001, which came into force on 1 December 2001. Its provisions are read alongside the deed itself and, for a trust under foreign law, that law (see choosing the governing law).

Typical trustee failings

Trustee misconduct tends to fall into a few recurring patterns.

Record-keeping deserves a note. Section 38(3) of the Trusts Act 2001 requires the trustee to keep up-to-date accounts and documents, and an alphabetical register of the names and last known addresses of each beneficiary and settlor, including for a non-resident foreign trust the trustee administers. Accounting records must be kept for at least 5 years after the operations concerned are completed. A trustee who cannot produce them has a problem before any loss is even measured.

Who is a qualified trustee, and why it matters

Under section 2 of the Trusts Act 2001, a qualified trustee is an FSC-licensed corporate service provider (Management Licence) or another Mauritius-resident person authorised by the FSC to provide trustee services. Section 28 caps the number of trustees at 4 and requires at least one qualified trustee at all times, although a missing trustee does not by itself make the trust invalid.

For a beneficiary this has a practical consequence. A qualified trustee is a licensed, regulated business, and the FSC supervises it. Under the Financial Services Act 2007, such a trustee must keep a record of each trust it administers, available to the FSC on request, and must supply the information the FSC needs for its register of trusts. Regulation does not replace a court remedy, but it gives a second place to look when something appears wrong.

Trustee liability: what a beneficiary can ask for

Trustee liability in Mauritius is built on the general principles of trust law and the Trusts Act. The remedies below are the usual ones; which are available, and against whom, depends on the facts and on the deed (a clause may limit liability, though not for every kind of wrong).

Compelling performance

A beneficiary may ask the court to order the trustee to do what the deed requires: render accounts, make a decision, or stop doing something prohibited. This is often the first and least drastic step.

Restoring the trust fund

Where the trustee has caused a loss, the court may order the trustee to restore the trust property or pay compensation to the trust. The money goes back into the trust rather than to the claimant personally, unless the claimant is the only person entitled.

Tracing and recovering property

If trust property has been transferred wrongly, a beneficiary may seek to follow it into the hands of a recipient. How far this goes depends on whether the recipient gave value and knew of the breach. Trusts also face separate questions when creditors are involved, covered in trusts and creditors.

Removing or replacing the trustee

A serious or repeated failing may justify asking the court to remove the trustee and appoint another. If the deed names a protector, that person may hold the power to dismiss and appoint trustees. Under section 24 of the Trusts Act 2001, unless the deed says otherwise, a protector can revoke and appoint trustees. See powers of a trust protector for how this works in practice.

Setting aside a decision

A distribution or other act taken outside the trustee's powers, or for an improper purpose, can be challenged. The wider question of attacking the structure itself is dealt with in can a trust be challenged in court?.

Who can act when there is no beneficiary

A purpose trust has no beneficiary, so someone else must police it. Under section 19 of the Trusts Act 2001, such a trust needs an enforcer and a successor enforcer. Section 21 says the same person cannot be both trustee and enforcer, and the enforcer is entitled to the trust's annual accounts, a copy of the deed and the legal advice the trustees received. If the enforcer dies, refuses or cannot act, the qualified trustee must inform the Attorney-General in writing, who appoints a successor within 90 days. For the comparison between the two roles, see enforcer vs protector.

A practical route for a beneficiary

Steps one to three cost little and often settle the matter. Before escalating, read how a beneficiary can request trust information and how to find out if you are a beneficiary, which deal with the earlier stages in detail.

Confidentiality and disclosure in a dispute

Mauritius trusts are confidential by design. Under section 33 of the Trusts Act 2001 (rewritten by Act 9 of 2019, in force since 29 May 2019), the trustee keeps information about the trust confidential, and a court orders disclosure only at the request of an investigating authority when the information is required in good faith for an investigation or proceedings relating to a financial crime.

That text concerns outsiders and authorities. It does not mean a beneficiary is without rights against the trustee; the question of what a beneficiary can see is separate and is covered elsewhere on this site. For the general picture, see are Mauritius trusts confidential?.

Transparency rules that help a beneficiary

Several regimes record who is behind a trust, which can help establish the facts.

• The FSC must keep a register of domestic trusts and of foreign trusts that have at least one qualified trustee (section 26A of the Financial Services Act 2007). It holds, among other things, the deed and its amendments and the identities and addresses of beneficiaries, trustees, settlors, protectors and enforcers.
• Each licensee must keep a beneficial ownership register for its clients (section 29 of the same Act).
• Under the FIAMLA 2002, the beneficial owner of a trust-type arrangement includes the settlor, the trustee, any protector, each beneficiary (or the class of beneficiaries and objects of a power) and any other natural person with ultimate effective control.
• A trustee of an express trust must declare that status to a reporting person such as a bank when starting a business relationship or carrying out an occasional transaction of at least Rs 500 000 or the foreign currency equivalent (section 17C(5A)).

These registers are mostly accessible to authorities, not to beneficiaries, so they are a source of accountability rather than a substitute for a claim. See also is there a register of trusts in Mauritius?.

Tax consequences when a breach is put right

Restoring a loss does not take the trust outside the tax rules. Under the Income Tax Act, a trust is taxable on its taxable income at the Part IV rate of the First Schedule, which is 15%, and any distribution to a beneficiary is deemed to be a dividend for the beneficiary (section 46(4)). A compensation payment or recovery may therefore affect the trust's accounts and filings. How it is treated depends on the nature of the sum, so tax advice should accompany legal advice. The general position is explained in how trusts are taxed in Mauritius.

Before you act: a short checklist

• Obtain a copy of the trust deed and any amendments
• List the specific acts or omissions that concern you, with dates
• Check whether the deed names a protector or enforcer
• Check which governing law applies
• Ask the trustee for accounts and explanations in writing
• Keep every reply and document you receive
• Take advice from a lawyer before starting proceedings
• Consider whether a negotiated outcome is possible first

When the problem is the structure, not the trustee

Sometimes the difficulty is not a single act but a trust that does not suit the family, or terms that no longer work. Changing the terms is a different exercise from suing, and is covered in changing the terms of an existing trust. If a trust is being used as a front and the settlor has kept real control, a court may treat it differently; see sham trusts.

If you would like general information about structures with an FSC-licensed corporate service provider (Management Licence), you can write through the contact form.