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  1. 1. INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA END-OF-SEMESTER EXAMINATION SEMESTER I, 2011/2012 SESSION AHMAD IBRAHIM KULLIYYAH OF LAWS Programme : Bachelor of Laws Level of : Third Study Reading Time : 2.30 p.m. – 2.45 p.m. Date : 08.01.2012 Duration : ( 15 minutes ) Answering Time : 2.45 p.m. – 5.45 p.m. Section(s) : All Sections Duration ( 3 hours ) Course Title : Equity & Trust 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. ANSWER FOUR (4) QUESTIONS, ONE (1) FROM EACH PART AND ONE (1) FROM ANY OF THE PARTS REFERENCES ALLOWED TRUSTEE ACT 1949 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 Discuss the validity of the following bequests from the will of Thomas Pine, deceased: (i) ‘RM200,000.00 to my executors on trust in equal shares for my cousins and nephews.’ Thomas was survived by at least five nieces and nephews, but perhaps more: one of his brothers emigrated to Iceland many years before, and has not been heard of since; (4 marks) (ii) ‘RM200,000.00 to my executors on trust for those to whom they consider I owe a spiritual obligation in such shares as they in their absolute discretion shall determine.’ Thomas used to attend Sunday prayers regularly at St Martin church; (3 marks) (iii) ‘RM200,000.00 to my executors on trust, to be distributed at their absolute discretion amongst my friends in Melawati Golf Club. In case of doubt, they can consult Mr. Smallball who will confirm whether a particular individual was a friend of mine’; (4 marks)
  3. 3. 3 (iv) ‘My executors to distribute 20% of my shares in Genofarm Sdn. Bhd. equally to each of my children provided he or she is an adherent to the doctrine of the Catholic Church.’ Thomas was survived by two children, James and Philomena. James is a vicar at the Ampang Catholic Church while Philomena married to Ahmad is a devout muslim convert known as Ameenah. (4 marks) QUESTION 2 (i) ‘… there is no equity in this court to perfect an imperfect gift’ per Turner LJ in Milroy v Lord (1862) 45 ER 1185 Comment on the importance of the above dictum. (5 marks) (ii) In 2006, Pak Tulis covenanted with Baca and Fikir that he would pay to them all royalties he might receive from the publication of a book he was currently writing to be held on trust for his son Zubair. The book has since been published and is a runaway success. Pak Tulis has received over RM100,000.00 in royalties. However, he has now had a misunderstanding with Zubair who has given up his final year law degree course to become a D J with Radio Selangor. Pak Tulis refuses to transfer anything to Baca and Fikir. Discuss. (5 marks)
  4. 4. 4 (iii) Rajen took out a life insurance policy, insuring his life for a minimum sum of RM300,000.00. Although he was named as the beneficiary he told his son Samy in the presence of Chan, the insurance agent that Samy’s dream of doing a dental course was now a reality even if he (Rajen) was to die prematurely. A year later Rajen suffered a heart attack and passed away. Samy has been offered a place at International Dental University to read dentistry but his mum tells him that she cannot afford the fees. When Samy inquired about the proceeds of the policy she told him that his brother Yogi and sister Sonia insist that they want their share of their late dad’s property including the proceeds of the policy Advise Samy. (5 marks)
  5. 5. 5 PART B QUESTION 3 Anne, a rich property developer, made her will in 2008. She leaves her shares in Build & Co. ‘to Sam and John equally in the knowledge that you will carry out my hopes.’ In 2007, she told Sam that she wanted both Sam and John to hold the shares on trust for her illegitimate son, Arnie. Sam had already agreed, although John did not know of this arrangement. In the same will, Anne leaves the town house ‘in trust to William and Mary for the purpose with which they are familiar.’ When Anne had told William and Mary of her intentions in 2006, they had already accepted her plan of allowing them to live in the house providing that they would leave it in their wills to the Homeless Charity. Anne died in 2010, and John wants to claim his shares. However, Sam wishes the shares to go to Arnie. In addition the Homeless Charity would like to know whether they can expect to receive the town house when William and Mary die, even though both have denied that they are bound and have made it clear that they wish to leave the house to their own son. Advise the parties. (15 marks)
  6. 6. 6 QUESTION 4 a) Non charitable purpose trusts are to be regarded as anomalous and not to be extended. Discuss. (6 marks) b) Consider the validity and type of trust created by the following dispositions found in the will of Alexander who died in 2010: (i) $50,000.00 to Sam and John upon trust for such charitable or benevolent objects as Zack, my trusted friend shall in his absolute discretion select. (3 marks) (ii) $50,000.00 to the University of London upon trust to establish and maintain in perpetuity a School of Law Reform. (3 marks) (iii) $50,000.00 to my trustees for the promotion of physical recreation for Malaysians in London. (3 marks)
  7. 7. 7 PART C QUESTION 5 (i) In Re Whitely (1886) 33 Ch.D 347 at 355, Lindley L.J stated: “The duty of a trustee is not to take such care only as a prudent man would take of he had only himself to consider; the duty rather is to take care as ordinary prudent man would take if he were minded to make an investment for the benefit of other people for whom he felt morally bound to provide”. Elaborate on the relevance of the above quotation and support your answer with decided cases. (8 marks) ii) Taylor, one of the trustees of AT Trust, used trust funds to pay for some of the premium on a life policy which had been executed in favour of his wife and children. A year later, due to stress, Taylor committed suicide. Swift, the other trustee also happens to be one of the beneficiaries of AT Trust. Advise the beneficiaries of the trust. (7 marks)
  8. 8. 8 QUESTION 6 i) Comment on TWO (2) defences available in dealing with breach of trust as decided in the case of Re Pauling Settlement Trust [1961] 3 All ER 713. (5 marks) ii) Allen was appointed as the trustee of Asmaradana Trust. He deposited RM30,000.00 of trust money in his account which was RM10,000.00 in credit. He then took out RM15,000.00 and used RM10,000.00 to buy shares in CC Sdn. Bhd. and RM 5,000.00 to buy a brand new camera. A week later, he spent another RM 10,000.00 on holiday in Europe with his family. He gave RM100.00 to his son, who used to buy lottery tickets and one of the ticket won RM1.5 million. He attended an auction of paintings and bought one worth RM5,000.00. The painting is currently worth RM20,000.00. The shares in CC Sdn. Bhd. on the other hand are now worth RM60,000.00. Advise the beneficiaries of Asmaradana trust. (10 marks)