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Nature of Trustees' Office
 

Nature of Trustees' Office

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  • Onerous : He is required to observe the highest standards of integrity and a reasonable standard of are and skills in the management of the trust. He is subject to onerous personal liability if he fails to reach the standard set. Legal title without its equitable counterpart is by no means a priviledge. That is why the court require a very clear evidence. Eg : A set
  • Re Vinogradoff (1935) W.N 68 : A child of 4 years old was held be able to hold property on resulting trust. Re Manson : Attempts to hold / claim funds in the hands of the Crown on the ground that the Crown should be treated as trustee have not been successful.
  • Court will appoint proper person / fit person if no nomination and appoint an official in the Court. Remuneration must be paid Direction will be given by Court
  • 1)Court has power to appoint new trustee either to substitute / added to the existing trustee
  • Situation where Ct has power to appoint new trustee to subsitutite trustee who is i)sentenced to a term of imprisonment or ii)is mentally disordered or iii) is a person of unsound mind or iv)is a bankrupt or v)is a corporation which is in liquidation or has been dissolved
  • If he retires in order to facilitate a breach of trust by his successors he will remain liable. (head v Gould (1898) 2 Ch 250

Nature of Trustees' Office Nature of Trustees' Office Presentation Transcript

  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 1TRUSTEE
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 2Learning Objectives Students will be able to know;i) The concept of trusteeshipii) Appointment of trusteeiii) Removal of trustee.iv) Retirement of trusteev) Number of Trusteevi) Fiduciary Nature of Trusteeship.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 3Nature of Trustee’s office Imperatives Onerous : He must act exclusively inthe interest of the trust Many of these powers and duties aredescribed in the trust instrument. It also depends upon the ctc in whichtrust arises.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 4Position in Malaysia Trustee Act 1949. Quaere : Does it includes totally theapplication of equity in Malaysia NO Trustee Act only covers some topic. Others will be governed by Equity.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 5Codified Part Relating toDuties of Trustee 1) Appointment, retirement andremoval of trustee (s39 - s45) 2) Powers of trustee a) General power (s16 – s30 & s 68) b) Investment power (s11 – s15) c) Maintenance and AdvancementPower (s36 – s37)
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 6 3) Indemnity from liability of trusteeand his representatives (s31 – s 35 &s66) 4) Powers of Court a) General (s45 –s 47) b) Vesting Power (s44 – 58) c) Others (s59 – s 65)
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 7Uncodified Part Relating toTrustee a) A standard of care to be exercisedby the trustee b) Duty of trustee or appointment c) Duty of trustee as fiduciary d) Remuneration e) Liability for the breach of trust f) Measure of liability
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 8 Defences of trustee Personal & Proprietary claim - tracing
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 9WHO CAN APPOINTTRUSTEE. Court has inherent jurisdiction inactions for the administration of truststo appoint or remove a trusteecompulsorily. Court will need to look powerscontained in the instruments
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 10APPOINTMENT OFTRUSTEE General rule : Any person capable ofholding property in law could be made atrustee and it is for the settlor or testator todecide the basis on which a person ischosen. The court is under no duty or obligation todetermine the reasons for the deceased’sappointment of the defendant as the trusteeof her estate PHUA CHUI HAR V AMANAH RAYA BHD[2002] 4 AMR 4753.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 11Who May be A Trustee 1) Minor - cannot be appointed as a trustee – can’thold a legal estate. An infant may becomea resulting or constructive trustee ofpersonalty(Re Vinogradoff[1935] WN 68 – a child of 4years was able to hold property onresulting trust. 2) Crown Old position : Crown cannot be trustee Accepted principal of vicarious liability
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 12 3) Judicial Trustee -An individual or corporation appointedby the court under Judicial TrusteeAct Rationale : to provide a middle coursein cases where administration of theestate by ordinary trustee had brokendown
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 13Section 40 of Trustee Act 1949 Power of appointing new or additionaltrustees. (1) Where a trustee, either original or substituted,and whether appointed by a Court or otherwise, i) is dead, or ii) remains out of Malaysia for more than twelvemonths, or iii) desires to be discharged from all or any of thetrusts or powers reposed in or conferred on him,or iv) refuses or is unfit to act therein, or v) is incapable of acting therein, or vi) is a minor,
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 14Who may exercise power ofappointment Section 40(1) stated that it may be exercised bythe following persons subject to the restrictionsimposed by this Act on the number of trustees - (a) the person or persons nominated for thepurpose of appointing new trustees by theinstrument, if any, creating the trust; or (b) if there is no such person, or no such personable and willing to act, then the surviving orcontinuing trustees or trustee for the time being,or the personal representatives of the lastsurviving or continuing trustee
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 15Appointment by the court This can be found under section 45 (1)(a) ofthe Trustee Act. (similar with s 41 0f the English Trustee Act1925) Statutory formula used by the court: where “it is inexpedient, difficult or impraticable soto do without the assistance of the court.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 16Section 45 of Trustee Act 1949Power of Court to appoint new trustees. (1) (a) The Court may, whenever it isexpedient to appoint a new trustee ornew trustees, and it is foundinexpedient, difficult or impracticableso to do without the assistance of theCourt, make an order appointing a newtrustee or new trustees either insubstitution for or in addition to anyexisting trustee or trustees, or althoughthere is no existing trustee.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 17 (b) In particular and without prejudice to thegenerality of the foregoing provision, theCourt may make an order appointing a newtrustee in substitution for a trustee who i) is sentenced to a term of imprisonment or ii) is mentally disordered or iii) is a person of unsound mind or iv) is a bankrupt or v) is a corporation which is in liquidation orhas been dissolved.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 18 (2) An order under this section, andany consequential vesting order orconveyance, shall not operate furtheror otherwise as a discharge to anyformer or continuing trustee than anappointment of new trustees under anypower for that purpose contained inany instrument would have operated. (3) Nothing in this section gives powerto appoint an executor or administrator
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 19Case BHIKU Daeng & Ors v Maung ShweTun (1980) MLJ 184
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 20How many Trustee s39. Limitation of the number oftrustees. (1) In the case of settlements anddispositions on trust of property,whether movable or immovable, madeor coming into operation on or after thematerial date -
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 21 (a) the number of trustees thereof shallnot in any case exceed four, andwhere more than four persons arenamed as such trustees, the four firstnamed (who are able and willing toact) shall alone be the trustees, andthe other persons named shall not betrustees unless appointed on theoccurrence of a vacancy; and
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 22 (b) the number of the trustees shall notbe increased beyond four. (2) The restrictions hereby imposed onthe number of trustees do not apply inthe case of property vested in trusteesfor charitable, religious, or publicpurposes.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 23Public Trust :s 9 of the GovernmentProceedings Act If there is any breach of trust createdfor public, religious, social or charitablepurposes or of there is a direction fromthe court, the AG or two or morepersons having interest in the trust,after obtaining the consent in writingfrom AG, may institute a suit for thepurpose of:
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 24 a) asserting any interest or right in thetrust property b) removing any trustee c)appointing new trustee d) vesting any property in a trustee e) directing accounts and inquiries f) declaring what proportion of trustproperty or of the interest therein shallbe allocated to any particular trust
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 25 g) authorising the whole or any part ofthe trust property to be let, sold,mortgaged, charged or exchanged, h) settling a scheme and i) obtaining such further or other reliefas the nature of the case may require.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 264) Removal of Trustee Three ways 1) Under an express power in the trustinstrument 2) Statutory power 3) Court’s Inherent jurisdiction.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 27a) Express Provision The trust instrument may expresslygive power to remove trustees. Such power must be strictly construed. The donee of such power must strictlycomply with it if he wishes to act on it.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 28b) Statutory Provision i) Section 40 (1) If trustee remains out of Malaysia formore than 12 months or refuses to actor is unfit or incapable to act or is aminor he can be removed and replaceby one or more trustee
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 29 ii) If the court exercises its powersunder section 45 it may be remove atrustee in the course of appointing anew trustee or trustees.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 30c) Court’s inherent power The court possesses an inherentjurisdiction to remove trustee in theexecution of trusts. It is rarely used
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 31 The Court need to have a clearground for removal in cases where atrustee is ignoring one of his dutiesbecause sometimes in some ctcthough it will not constitute breach oftrust
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 32Halsbury’s Laws of England(4th ed), vol. 48 para. 783: The court will remove a trustee, including the trustee of aforeign settlement,where he refuses to execute the trust(Palairet v. Carew [1863] 32 Beav 564;Luke v. SouthKensington Hotel Co [1879] 11 Ch D 121) or has mismanagedthe trust (Ex Parte Phelps [1742] 9 Mod Rep 357; Ex ParteReynolds [1800] 5 Ves 707; Peatfield v. Benn [1853] 17 Beav522) or has disqualified himself by hiscircumstances orconduct from continuing to hold the office (Millard v.Eyre[1793] 2 Ves 94) or may perhaps do so if his continuancein office would be likely to be detrimental to the trust owing tohis being out of sympathy with its objects (A-G v. Hardy [1851]1 Sim NS 338 at p 357) and with the beneficiaries. A trusteewill not, however, be removed against his will on account of apecuniary embarrassment which has ceased to exist andwhich does not appear to have imperilled the interests of thebeneficiaries (Re Bridgman [1860] 8 WR 598).
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 33Letterstedt (now VicomtesseMontmort) v. Broers & Anor [1884] 9AC 371:at p 389 per Lord Blackburn ‘Friction or hostility between trusteesand the immediate possessor or thetrust estate is not of itself a reasonfor the removal of the trustees’
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 34Yusof bin Ahmad & Ors v. HongkongBank (Singapore) Ltd & Ors [1990]2MLJ 326 Chan Sek Keong J (as he then was)held that a trustee who failed tocomply with the directions of thetestator may be removed by the courteven if no harm has been done to thebeneficiaries or to the trust.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 35Arumugam Ponusamy v.KarupiahRamasamy & Ors [2005] 4 CLJ 805 The discretion vested in the HighCourt to direct the removal of atrustee. The trust in the present case is anexpress trust.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 365) Retirement of Trustee Retirement means a discharge fromfurther responsibility and liability underthe trust . A trustee should not retire when facedwith disputes among beneficiaries andleave them to settle their differencesamong themselves
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 37 Three ways 1) Under an express power in the trustinstrument 2) Statutory power 3) Under an Order of Court
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 38a) Express Provision The trust provision may expresslyprovides for the retirement of trustees.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 39b) Statutory Provision i) Section 40(1) enables a trustee toretire (desire to be discharged) if he isbeing replaced by another trustee ortrustees.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 40 ii) Section 43 (1) : allows the retirement of atrustee without new appointment subject tofollowing conditions : A) a min of 2 trustee or a trust corporationwill remain after his retirement B) his co-trustee and such personempowered to appoint new trustees consentto his retirement C) his declaration to retire must be in writing
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 41 iii) Court Order The Court may order a trustee to retireunder section 45 when it is appointinga new trustee or new trustee (insubstitution for) The court also possesses power underits inherent jurisdiction to allow atrustee to retire.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 426) Death Trusteeship automatically terminateson death. Section 23 (1) : where a trust isimposed on 2 or more trustees : thesame may be performed by theirsurvivors ; for the time being.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 43 If there is a sole trustee or lastsurviving trustee : the trust estatedevolves on his personalrepresentatives.
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 44FIDUCIARY NATURE OFTRUSTEESHIP 1) Remuneration Fundamental principle : cannot expectremuneration except; Provided by the trust instrument Authorised by the court Authorised by legislation S 46
  • 14/06/13 Equity & Trust II (Dr. Zuraidah Ali) 45 2) Secret Profits- not suppose tosecure benefit for himself by takingadvantage of the trust Not to take remuneration as trustee-director Not to purchase trustproperty/beneficial interest Not to compete with trust Not allowed to receive bribe.