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  1. 1. END-OF-SEMESTER EXAMINATION SEMESTER I, 2006/2007 SESSION AHMAD IBRAHIM KULLIYYAH OF LAWS Programme : Bachelor of Laws Level of : Third Study Reading Time : 9.00 a.m. – 9.15 a.m. Date : 1.11.2006 Duration : ( 15 minutes ) Answering Time : 9.15 a.m. – 12.15 p.m. Section(s) : All Sections Duration ( 3 hours ) Course Title : Equity & Trusts II Course Code : LAW 3711 This Question Paper Consists of 8 Printed Pages With 6 Questions. INSTRUCTIONS TO CANDIDATES DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO. There are three parts. Answer FOUR (4) Questions Only. Answer at least ONE (1) Question From Each Parts. REFERENCE ALLOWED Selected Malaysian Statutes on Equity & Trust Any form of cheating or attempt to cheat is a serious offence which may lead to dismissal Statutes should be free from any form of annotation. APPROVED BY
  2. 2. 2 PART A QUESTION 1 a) Mohan in his will made some bequests. He appointed Ashok as his trustee. When Mohan died, his eldest son, Rahul challenged these bequests. Ashok seeks your advise to determine the validity of such bequests. i) It is my hope and desire that RM500,000 will be given to my longtime companion and girlfriend Serena Kaur for her maintainence during her lifetime as she is always there for me whenever I need her. ( 2 marks) ii) RM 1million to be used for the usage of all my single female employees, their close relatives and all the single mothers who are not above 40 years old, residing nearby my warehouse. ( 2 marks) iii) A handsome sum from my life insurance policy to be distributed to all the war victims in Lubnan. (2 marks)
  3. 3. 3 b) The rules in Milroy v Lord (1862) 45 ER 1185 relating to the constitution of property in the hand of trustee has been adopted in Malaysia. Turner LJ said: “ I take the law of this court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and to render the settlement binding upon him. Evershed MR in RE ROSE, ROSE v I.R.C (1952) Ch 499. on the other hand states; “And for my part I do not think that Milroy v Lord is an authority which compels this court to hold that in this case, where, in terms of Turner LJ’s judgment, the settlor did everything which, according to the nature of the property comprised in the settlement, was necessary to be done by him in order to transfer the property, the result necessarily negatives the conclusion that, pending registration, the settlor was a trustee of the legal interest for the transferee.” Explain the above two judgments to Mohan as he is very confused. Explain also the advantage or disadvantage, between these two judgments, in relation to the constitution of trust with reference to both English and Malaysian cases, if any. (9 marks)
  4. 4. 4 QUESTION 2 a) Sharmeela, Mohan’s sister stayed with her only son, Abraham for almost 10 years after the death of her husband. Last two years, she decided to buy a house in Sunway Kinrara, jointly with Abraham. Abraham contributed 40% of the total purchase price of RM400k. Nevertheless considering the fact that Abraham is her only son, Sharmeela requested the house to be put under Abraham’s name. Abraham got married end of last year to Anuja, a beautiful lady who happened to be the daughther of Sharmeela’s late husband’s best friend, Mokana. It had been mutually agreed that Sharmeela will occupy 2 rooms in the house and Abraham and Anuja occupy the rest of the house. Six months after the marriage, differences arose between Sharmeela and Anuja. Anuja threatened to leave Abraham if Abraham refused to ask Sharmeela to move out. Abraham brings an action against Sharmeela for the possession of the house. Sharmeela is very upset. She comes to seek for your advice on her right over the house. (7 marks) b) The liability of a stranger as a constructive trustee is divided to two categories. This is based on the dictum of Lord Selbourne in Barnes v Addy [1874] LR 9 CH App 244. He states; “Strangers are not to be made constructive trustees merely because they act as agents of trustees in transactions within their legal powers, transactions, perhaps, of which a court of equity may disapprove, unless those agents
  5. 5. 5 receive and become chargeable with some part of the trust property they assist with knowledge in a dishonest or fraudulent design on part of trustee.” Explain to Mohan the position of a stranger as a constructive trustee with reference to decided cases. (8 marks)
  6. 6. 6 PART B QUESTION 3 Mohan made a declaration of a private trust in favour of his wife Priyanka and his children and upon their death, trust properties to be given to his next of kin. Mohan in his trust deed named his good friend Ashok as the trustee. It is stated in the trust deed that, one of the major duties of the trustee is to make investment of the trust properties. It is also stated that, every investment made must be subjected to the provisions of the Trustee Act 1949. Ashok, in breach of his duty, invested in unauthorized investment, which later increased in value. Advise all parties (15 marks) QUESTION 4 Ashok, a trustee, visited China for three months. He borrowed the sum of RM 30,000 from the trust fund that consists of RM 70,000, for his visit to China. Before returning to Malaysia, he bought one Chinese vase worth RM 5,000 for beneficiary number one, a dinner set for trustee number two which worth RM 15,000 and pure China silk worth RM 2,000 for beneficiary number three. On returning to Malaysia, Ashok told the beneficiaries that he would like to claim for the money spent on the Chinese vase, dinner set and pure China silk. The beneficiaries reject his claim and plan to take action against Ashok.
  7. 7. 7 a) Advise the beneficiaries. b) Discuss the various defences available for Ashok to defend himself against the claim by the beneficiaries. (15 marks)
  8. 8. 8 PART C QUESTION 5 a) Ashok told Mohan to create a trust in offshore. Presuming Mohan is only a resident in Malaysia, advise him what are the advantages of creating such a trust in Labuan and on the procedure and types of trust to be created offshore. (7 marks) b) Mohan came across a few alien words such as Unit Trust and Real Estate Investment Trusts (REIT). Explain to him in detail on such trusts and compare to Islamic concept. (8 marks) QUESTION 6 Mohan found a platinum sapphire bracelet while jogging at the Seremban Lake Garden. He is not keen to report to the police as he has a strong belief that the police might not be able to search for the person who has lost the item. He was advised by Ashok to advertise in the newspapers. Meanwhile Priyanka fell in love with the bracelet and wanted to wear it. Advise Mohan on the rule of lost and found and luqatah. (15 marks)