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TRUSTEE

Appointment of trustees
-creation of the trust when the initial trustees must be appointed
-continuance of the trust (trustee dies or decides to retire) hence, subsequent
appointment must be made.

1. Initial trustees
Normally appointed by person who creates the trust (the settlor in an inter
vivos trust or testator in case of testamentary trust)

Settlor may be the trustee. Testamentary trust – executor may also be the
trustee

Power of appointment – Instrument creating the trust nominates someone to

appoint/the settlor may reserve himself the power of appointment.

Express powers of appointment have to be strictly construed.

Re Wheeler and De Rochow

The power to replace ‘incapable’ trustees could not be used to make an
appointment when one of the trustees became ‘unfit’, which is bankruptcy.

Re Skeat’s Settlement
The trust instrument stipulated donee could appoint ‘any other person’ and
they appointed themselves as trustees. Judge declared the appointment
invalid as it was improper exercise of a fiduciary character. (improper exercise
of a power of a fiduciary character) (may lead to conflict of interest)

Montefiore v Guedalla
It is a very salutary rule that an appointer ought not, save in exceptional
circumstances, appoint himself. (discourage to appoint yourself.)

Trust to be held by
i) person who is mentally sound
ii) not a minor
iii) within the jurisdiction of the court.

Re Vinogradoff
Minor can be a trustees of an implied/resulting & constructing trust (not trustee
for express trust)

Phua Chui Har v Amanah Raya Bhd

Any person capable of holding a property could be appointed by the testator
on his decision and the court has no duty or obligation to determine the
reasons of appointment.
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No appointment of trustees provided under trust instrument/will, court will

make necessary appointment to save the trust for equity will not fail a trust
due to a failure for want of trustee, except : Re Lysaght (1965)– unless it is
the essence that the trustees selected by the settlor and no one else shall act
as the trustee, and the trustee cannot and will not undertake the office, the
trust will fail.

2. Subsequent appointment
a) Pursuant to express provision
- Rare, due to the extensive statutory provisions in Trustee Act 1949
- Creator of trust will nominate person who exercise powers of appointment

b) Pursuant to Section 40 of the Trustee Act 1949

- Applied to trustees and not personal representatives
- New Trustees need to be appointed
i) The trustee is dead (after assuming the office of trusteeship or trustee
predecease the testator) die in office

ii) Remains out of Malaysia for more than 12 months, need to be continuous

Re Walker
Trustee was out of jurisdiction for more than a year but there was a brief return
for one week, hence, no new appointment could be made.

iii) Desires to be discharged from all or any of the trust or power reposed or
conferred on him. (request to relief of office)

iv) Refuse to act, usually involve the case of disclaimer when the disclaiming
parties refuse to act.

v) Unfit to act – personal incapacity

Re East – mental illness

Re Lemann’s Trust – old age and infirmity
Re Wheeler and De Rochow – one of the trustees became bankruptcy

vi) Incapable of acting

Section 40(3) – Dissolved corporation trustee deemed to be incapable of
acting

Mennard v Welford
Trustee who stayed out of New York for 20 years was incapable of acting for
the purpose of exercising his express power of appointment.

vii) Minor
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viii) Has been removed under a power contained in the trust. Section 40(2)
– removed trustee may be replaced by a new trustees as if he was dead.

- Who exercise power of appointment?

i) Person nominated for the purpose of appointing new trustees by the trust
instrument. Section 40(1)(a)

ii) The surviving or continuing trustees. Section 40(1)(b)

iii) Personal representatives of the last surviving and continuing trustee.

Section 40(1) – can be used to increase the number of trustees – allows one
or more other persons... to be a trustee or trustees.

Appointment must be in writing – easily satisfied as it was usually made by

deed.

c) Appointment by the court

Section 45 – court has wide discretion to appoint trustees but guarded by
principles, substitution or addition, whenever expedient to appoint or
inexpedient difficult or impractical without the assistance of the court

Section 45(1)(b) – initiate the court to appoint

i) All the trustees predeceased the testator

ii) One of the trustees was in enemy territory unable to escape

Re May’s WT

iii) One of the surviving trustees was opposed to appointment by the existing
trustees
Re Rendell’s Trust

iv) Doubt of exercise of the statutory power of an express power of

appointment

v) Bankrupt trustees
Re A Solicitor

vi) replacement of an existing trustee against her will who had previously
agreed to retire but had changed her mind for no reason.
Henderson v Henderson

The court in making appointment will follow the principle of Re Tempest

1. wishes of the settlor
2. will not appoint person interested under the trust, so that every trustee
holds an even hand
3. whether the appointment could promote or impede the execution trust as
the very purpose of appointment is to make the trust better to carry into
execution
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Re Tempest
Concerned family settlement, 1 of the 2 appointed trustees predeceased the
testator and those vested with power to appoint new trustee cannot agree with
a selection. The court was asked to sanction the appointment of Mr Petrie and
one of the beneficiaries opposed the petition with the ground of the testator’s
wish to exclude Mr Petrie from managing the trust.
Held: x appointed because of testator’s wish and the likelihood of bias towards
some beneficiaries.

Yusof bin Ahmad bin Talib & Ors v Hong Kong Bank Trustee
(Singapore) Ltd & Ors.
The court in deciding on the nominee should consider the capacity,
circumstances or character of the nominee to see if he was well qualified for
office, was a person of independent means, had a great deal of leisure and a
considerable part of his time to spend at the place where the trust property is
situated

Retirement of trustees
Retirement in the Act : Discharge from trust (TA 1949)

i. Express provision
The trust may expressly provide the retirement of trustees although it is
unlikely in view of the adequate statutory provisions
prob q.
ii. Statutory Provision
Section 40 (1) – it enables the trustee who has the desire to discharge to
retire if he is being replaced by another trustee or trustees.

Section 43(1) – allow retirement without new appointment, subject to

conditions:
(a) minimum of two trustees or a trust corporation will remain after the
retirement
(b) his co-trustees or such other person empower to appoint new trustees’
consent to the retirement
(c) his retirement must be in writing.

Consent of all beneficiaries

Trustee can obtain the consent of all the beneficiaries who must be of full age
and sui juris (age of independent) he may retire. However, retirement with the
consent of beneficiaries but not together with co-trustee is doubtful.

iii. Court Order

Section 45 – A court may order a trustee to retire when there is a new
appointment of trustee or trustees. The court possesses power under the
inherent jurisdiction to allow a trustee to retire. By one or more trustees.

Ligar Fernandez v Eric Claude Cooke

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The 12 month-rule must be observed strictly, in the absence must be

continuous or else the trustee cannot be removed under this ground. In this
case the defendant was absent from Malaysia for over 12 months, and thus,
the court rendered him legally incapable of acting as a trustee and ordered for
his removal. A trustee is considered to be refusing to act when his conduct or
inability to perform an act is endangering the interest of the trust by hindering
his discharge of duty as a trustee.

Section 45 – if the court is exercising under Sec 45, it may remove a trustee
in the course of appointing a new trustee or trustees. The court is empowered
to appoint new trustee or trustees in the prescribed circumstances

Court’s inherent power

-must be a genuine case and during the execution of trust

Clarke v Heathfield
The inherent power of the court was used to remove the trustees of a union
who had refuse to obey orders of the court and who had facilitated the transfer
of union funds overseas to avoid sequestration when union members had taken
illegal industrial action.

-Mere friction between the trustees and the beneficiaries is inadequate for the
court to exercise inherent jurisdiction

Re Wrightson
You must find something which induces the court to think that either the trust
property will not be safe or that the trust will not be properly executed in the
interest of the beneficiaries.

Lettersted v Borers
The beneficiary alleged misconduct of the part of the tru stees which was not
substantiated. The court held that in positive misconduct, the impose of
inherent jurisdiction to remove trustee is of no difficult but it is not every
mistake or neglect of duty or inaccuracy of conduct of trustees that would
induce the court to adopt such course.

Death (trusteeship automatically terminates on death.)

Section 23(1) – trust is imposed on two or more trustees jointly, the same
could be perform by the survivors of them for the time being. OR the death of
the last surviving trustee, the trust estate devolves around his personal
representatives. The personal representative is not bound to accept the trust
and may appoint new trustee under the provision of Sec 40 (1).

Disclaimer
A person nominated to be a trustee is not obliged to take the office of the
trusteeship against his will. He may disclaim it, usually by deed that provide
clear evidence of disclaimer. It can be oral or inferred from the conduct of the
nominee.
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Re Lister
For the disclaimer to be effective it must be of the whole trust and not just a
part of the trust. The effect of disclaimer is that if there are other trustees the
property will vest in them. If the disclaiming trustee was sole trustee or if all
the trustees disclaim then if inter vivos the settlor himself will become the
Trustee and if the Trust was through a will, the personal representative will
hold on trust. If the instrument creating the trust vests someone with power
to appoint new trustees this power may be used to fill the gap. If all else fails,
the court will appoint new trustees on application of those entitled.

Number of Trustees
Section 39 – a maximum of four trustee can be appointed in the case of trust
of moveable or immovable property.

If the number exceeds four then the first four named person, who are able and
willing to act, shall alone be the trustees.

The other may be appointed in the occasion of vacancy. Sole trustee is possible
but not advisable for the opportunity of fraud. In the case of trust of land, sole
trustee cannot give a valid receipt for the process of sales or other capital
money.

Duties of Trustees.
1.To trust
Ensure that the trust property is vested in his name and his co-trustees. The
moment appointed trustee, the legal title must be vested to the trustee.

Section 44(1)(a) – dispense the need of formal vesting but automatic

vesting. However, does not extend to the matter of land conveyed by way of
charge which requires the property to expressly convey into the name or
trustee. Court may help in vesting order to vest the tru st property Section
48-58.

Trustee holds legal title to the trust property, he or she owes fiduciary duties
to the beneficiaries who hole equitable title. Fiduciary is a person who holds a
legal or ethical relationship of trust with one or more other parties. Legal entity
(firm, bank) holding assets. (cash, property).

A fiduciary owes (among other obligations) duty of loyalty, full disclosure,

obedience, diligence and of accounting for all monies handed over to the
principal.

Fiduciary duties in financial sense exist to ensure that those who manage other
people’s money act in their beneficiaries’ interests, rather than serving their
own interests. FD is the highest standard of care in equity or law.
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paramount decision made in this case
Nature of FD declared in McPhail v Doulton – a trustee with a duty to
distribute, particularly among a potentially very large class, would surely never
require the preparation of a complete list of names, which anyhow would tell
him little that he needs to know. He would examine the field, by class and
category; might indeed make diligent and careful enquiries, depending on how
much money he had to give away and the means at his disposal, as to the
composition and needs of particular categories and of individuals within them
decide on certain priorities or proportions and then select individuals according
to their needs and qualifications.

2.Duty to invest
- s11,14,15, Section 6 of Trustee Act stated the duty of investment for the
trustees,13 liability improper investment.

- A trustee is under a duty to invest the trust funds in investments authorised

by the trust instrument, by statute TA 1949 or by court. A property drawn trust
instrument incorporates wide powers of investment. (Power in the act is
restrictive). The trustee must be fair to the income beneficiaries and those
entitled to the corpus. He must be honest and prevent risky and speculative
investment.

Tan Soo Lock v Tan Jiak Choo

A failure to invest the trust funds in authorised investment amount to breach
of trust. Simple interest at rate of 6% per annum should normally be charged
against trustees who keep trust funds uninvested in their hands. Under special
circumstances, a lower rate might be sanctioned, and where more serious
breaches of trust were involved, higher rate would be imposed.

- The duty of the trustee is not to exercise his power of investment as a prudent
man would take it had only himself to consider BUT duty to invest as an
ordinary prudent man would have taken if he were minded to take an
investment for the benefit of other people for who he
morally he felt morally bound to provide.

Re Whitley
Generally the law requires no higher degree for a trustee to execute his office
that man of ordinary prudence would exercise in the management of his own
affairs but in the event of investing the money, the discretion is different as if
he were a person sui juris dealing with his own estate.

Nestle v National Westminster Bank Plc

Trust suffer loss does not conclusively held trustee liable for the loss.

- Act in the best interest of the beneficiaries and must not allow social or
political views to affect their investment if the investment yields the best return
by way of income and capital
appreciation.
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Cowan v Scargill
Where an investment plan submitted by a financial expert recommend certain
overseas investment and in industries in competition with coal, the subject
matter was the fund of the National Coal Board and some trustees including
Mr Scargill rejected under ethical ground. The court held that the policy
seeking best financial returns on investment took precedence over ideological
considerations.

- Trustees must put aside their own personal interest and views and is refrain
from making investment by reason of the views they hold other than focusing
on which investment would be more beneficial to the beneficiaries

Trustee may have to act dishonourable if the interest of their beneficiaries

requires it. Thus, when trustee struck a bargain for the sale of trust property
which had yet to bind by a legally enforceable contract, they were under a duty
to consider and explore better offer they receive, not the offer they feel that
they felt in honour bound.

Buttle v Saunders
The trustee had a duty to consider and explore a better offer that they
received, and not to carry through the bargain to which they felt in honour
bound.

- Non-financial considerations could determine policy if all the beneficiaries

who are adult
would prefer to receive less returns from “evil and rained sources”

Harries v Church Commissioners for England

The trustees of the investment funds of the Church of England refused to invest
in gambling, tobacco, South African Companies and newspaper business which
they consider as offensive to the Church activities. The court accepted the
ethical considerations and directly relevant and justifiable to be adopted by a
religious charity.

4. Duty of apportion
- Section 2 of the Apportionment Act 1870 is the statutory rule of time
apportionment.

- Duty to apportion is corollary to Duty to Convert. Since there is no duty to

convert, there is no duty to apportion.

Howe v Dartmouth
The life tenant is entitled to all of the income, and the remainderman then
takes all of the capital on the death of the life tenant.

- If there is duty to convert (bound to sell any part of the trust fund)

Howe v Dartmouth
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There is no need for income to be apportioned. Life tenant will be entitled to

all income from the trust fund and the remainderman will in turn become
entitled to all capital. But where there is duty on the trustees to convert- i.e.
where they are bound to sell any part of the trust fund, either because the
trust instrument so provides or under the rule in Howe v Dartmouth, what is
to happen to the income from the property in question until it is sold? The
settlor/testator may have made express provisions in the trust instrument.
If the trust instrument is silent courts have developed different rules as to the
apportionment of such income between the life tenant and the ramaindermen.
There rules vary depending on nature of property concerned: rules are:
(i) Reality and leasehold – Life tenant takes full income from date of death
even if leasehold has < 60 years to run. X apportionment has to be made.
(ii) authorised investment – life tenant takes the whole income as from the
date of death.
(iii) wasting and unauthorised investment other than leasehold – life tenant is
not entitled to actual income, apportionment has to be made so that the life
tenant receive 4% of the value of investment, from the date of death until the
date of sale, the remaining income belongs to capital.

Under the rule in Howe v Earl of Dartmouth there may be duty to convert
and reinvest Authorised investments in the trust fund to maintain fairness
between the life tenant and the remainderman, in the absence of an intention
that the life tenant shall enjoy the income until sale, the second limb of the
rule is that the trustee is under a duty also to apportion the property fairly
between the life tenant and the remainderman until conversion.

5. Duty to distribute
- Failure to distribute the trust property to those who rightfully entitled under
the terms of the trust instrument amount to a breach of trust. High duty of
care to ascertain the correct beneficiaries.

Eaves v Hickson
The trustee was held liable for payment to the wrong person on the basis of
marriage certificate which was forged.

Hilliard v Fulford
Trustees were held liable for a bona fide construction of the trust instrument
which proved to be erroneous.

Section 32 TA 1949 protection afforded to a trustee who distribute after

advertisement.

6. Duty to beneficiaries
Aroozoo v Aroozoo
Duty of trustee not to falsify account for the purpose of setting up the adverse
title of a third party against his own beneficiaries.

Yap Tai Chee v Yap Tai Cheong

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Duty of trustee to look after the welfare of the beneficiary.

Khoo Tek Keong v Ch’ng Joo Tuan Ngoh & Anor

Trustee has a duty not to only act honestly but to act reasonably. The court
held that the trustee never consider whether the disposition of trust fund were
prudent and right to make as a trustee and he ought not to be excused for
breach of trust. (Loans made by trustee without security)

If a trustee under a fiduciary relationship, secures a benefit for himself by

taking the advantage of trust, equity will not allow him to retain the benefit
and he shall hold the benefit under constructive trust.

Keech Sandford
A trustee may not use his position as a trustee so as to enrich himself. A
trustee of a lease may not renew a lease for his own benefit but holds the
renewed lease upon a constructive trust for the beneficiaries. The court
forbade the trustee to take for himself a renewed term under a lease which he
held for the benefit of an infant.

Campbell v Walker
Any trustee purchasing the trust property is liable to have the purchase set
aside if in any reasonable time the beneficiary of the trust chooses to say he
is not satisfied with the trust. The ratio is that a trustee cannot be involved in
self-dealing with property belonging to the trust.

- Trustee may not involve in purchase of beneficial interest but

permissible if all the material facts were made available to the beneficiary
before the purchase took place.

Coles v Trecothick
The court stated that a trustee may buy from the beneficiary of a trust provided
that there is a clear and distinct contract, ascertain after examination of all
circumstances, prove that the beneficiary intended the trustee should buy and
there is no fraud, no concealment no advantage taken by the trustee of
information acquire by him in a position as a trustee.

Dougan v Mc Pherson
A purchase of a beneficial interest was set aside for failure to disclose the
valuation of interest to the beneficiary.

- Trustee must not compete with any business belongs to the trust.

Re Thompson
The trustee involvement in a watch-broking business was held to be a breach
of trust as it was an engagement which he would have personal interest
conflicting, or which might possibly conflict with the interest of person who he
is bound to protect.
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- Trustee has a fiduciary duty to the beneficiaries

Re Estate of Lee Wee Nam : Lee Hiok Ping v Lee Hiok Tng
The executor of the estate were trustee of the beneficiaries to whom they owed
a fiduciary duties.

7. Duty to give account and information

a) Trustee has a duty to maintain account

Pearse v Green
A trustee is under a duty to maintain accurate and updated accounts which
must be available on demand for inspection by the beneficiary or the
beneficiary’s lawyer.

Re Kavena Hadjee Mohd Yoosup

Where a common account is ordered, if the trustee sought to discharged
themselves by payment would amount to a breach of trust, such payment
might be falsified and would be disallowed, notwithstanding no breach of trust
had been specifically pleaded.

** although there is no general duty to have the accounts audited, sec 27(4)
gives the trustees absolute discretion to allow for such an activity to be carried
out at least not more than once every year or depending on the nature of the
trust property.

b) Duty to reopen settled account

Gan Ngoh Bee v Official Assignee

A settled account between a trust and beneficiaries who had not made though
investigation of account or had not been independently advised thereto, may
make it easier to reopen the account, if the case of reopening it is proved .
However, reopen itself does not render the settled account invalid.

c) Duty to give advice and information

- Provide the beneficiaries with information and to allow them to inspect trust
document. (income beneficiaries entitled to examined full set of account and
capital beneficiaries entitled for the capital account only, beneficial owners of
trust property, equitable owners of the document)

O’Rourkey v Darbishire
A beneficiary has the right of access to the document he desires to inspect as
it is their proprietary right. Beneficiary is entitled to see all trust document as
they are trust document and they are the beneficiaries.

- Exceptions:
(i) The right does not extend to documents which the beneficiaries have no
beneficial interest.
(ii) It also does not apply to documents which belong to the trustees.
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(iii) It also does not apply to documents which records the reasons for the
trustees’ decisions e.g in relation to the exercise of trustee discretions

Re Marquess of Londonderry’s Settlements

Trustees were authorized to distribute the trust fund according to whatever
proportion they think fit. One of the beneficiaries complained she received too
little. So she wanted to inspect all documents which would have stated the
reason for the trustees to distribute that way. Held: beneficiary was not
allowed to do so.

Re Gulbenkian’s Settlement Trusts

Trustees were given discretion to pay or not to pay income to certain
beneficiaries. Lord Reid: they are given an absolute discretion. So if they
decide in good faith at appropriate times to give none of the income to any of
the beneficiaries the court cannot pronounce their reasons to be bad. And
similarly if they decide to give some or all of the income to a particular
beneficiary, the court will not review their decision.

(iv) beneficiaries have no access to confidential documents

Hartigan Nominees Pty Ltd v Rydge

There are documents and, no doubt, there is information which have been
given to the trustee upon the basis that they be treated as confidential. It is
not every aspect of confidentiality which need be, for the present purpose,
examined…it is possible to envisage documents communicated to a trustee
which, though the property of the trust, are confidential and for that reason
should not be disclosed to beneficiaries