Meaning of trust

1. Topic 2: Trust
Meaning of Trust
• Halsbury’s Laws of Malaysia
Meaning of "trusť". Where a person has property or rights which he holds or is bound to exercise for or on
behalf of anotheror others,orfor the accomplishmentof some particularpurpose or particularpurposes,he
is saidto holdpropertyor rightsin trust forthe otheror those others,or for that purpose or those purposes,
and he is calledatrustee.A trust isa purelyequitableobligationandisenforceableinthe HighCourt.
• Underhill
A trust is an equitable obligationbindinga person(whois calleda trustee) todeal withpropertyover which
he has control (whichis calledthe trust property),forthe benefitof persons(whoare calledbeneficiariesor
cestui que trust),of whomhe may himself be one,andanyone of whommay enforce the obligation.Anyact
or neglectonthe part of a trustee whichisnotauthorisedorexcusedbythe termsof the trustinstrument,or
by law,iscalleda breachof trust.
 Westdeutsche LandesbankGirozentrale vIslingtonLBC
Once a trustis established,the beneficiary’sinterestisproprietaryincharacter.
 Re Scott (Deed)
Trust relationship cannot exist where the legal and equitable title merge: a person cannot be a trustee and
thusbe underfiduciary dutyinlawif itis forhimself alone.
The trust referstothe dutyor obligationsthatrestupona persondescribedasa trustee.The responsibilities
are in relation to property held by him, or under hiscontrol. He will be compelledby a court in its equitable
jurisdictionto administer that property in a manner lawfully prescribed by the trust instrument, or where
there be no specific provision written or oral, to the extent that such provision is invalid or lacking, in
accordance withequitable principles.Asa consequence the administrationwill be insucha mannerthat the
consequential benefitsandadvantagesaccrue,nottothe trustee,butto the personcalledcestui que trustor
beneficiaries,if there be any,if not,forsome purpose which the law will recognise andenforce.
Settlor, Trustee, Beneficiaries
Settlor” isa personorcompanywhotransferslegal titleof specificassetstothe trustee.Thistransferiseffectedunder
the termsthe settlorandtrustee have agreedandwhichare documentedinthe trustdeed.
“Trustee” isa personorcompanywhobecomesthe legal ownerof the assetstransferredintotrustwithoutobtaining
the right of economic enjoyment of those assets. A trustee is responsible for the administration of the trust in
accordance with the terms set out in the trust deed and the law governing the trust. A trustee is under a fiduciary
obligationtoadministerthe trustinthe bestinterestsof itsbeneficiaries.
“Beneficiary” isa personor company whohas equitable title tothe assetsheldintrust and the rightto benefitfrom
them.A settlormay be includedamongthe beneficiariesof atrust.

2. FormalitiesinCreation of Trust
 Knight v Knight
Thistestspecifiedthatfora validtrustto be created,there mustbe three certainties:
 (1) Certaintyof intention:there mustbe intentiontocreate a trust;
 (2) Certaintyof subjectmatter:the assetsconstitutingthe trustmustbe readilydeterminable;
 (3) Certaintyof objects:the people towhomthe trusteesare toowe a duty mustbe readilydeterminable.
Trust in Contrast to other Legal Relationships
1. Trust and Contract
A contract comesintobeingon account of consensusbetweencontractingparties;trustonthe otherhand is
primarilyfoundedonthe intentionof the settlor.There islittle tostopthe partiesto a contract from making
provisions to impose a contractual obligation on one party so as to protect the other, thus giving rise to a
situationakintoa fiduciaryrelationship.
 Norberg v Wynrib
The foundationandambitof the fiduciaryobligationare conceptually distinctfromthe foundationandambit
of contract andtort. Sometimes the doctrines mayoverlapintheirapplication,butthatdoesnotdestroy their
conceptual and functionaluniqueness.Innegligence andcontract the partiesare takentobe independentand
equal actors, concerned with their own self-interest. The essence of a fiduciary relationship, by contrast, is
that one partyexercisespoweronbehalf of another andpledgeshimselforherself toactinthe bestinterests
of another.
2. Trust and Debt
The principlesthatgovernthe relationshipof debt isbetweenacreditoranda debtor.The usage of the word
"trust" and the fact that money is kept in separate accounts and not mixed withmoney from other sources
are normally strong indications suggesting the creation of a trust, but these are not always conclusive: the
crucial questioniswhetherthe partieshave reachedanagreementtothe effectthatbothlegal andequitable
rightsand remediesshouldexisttogetherinrespectof the transactioninquestion.
3. Trust and Bailment
It involves the transfer of possession of goods to a person (bailee) who holds the goods for the direction of
the bailor,to whomthey will return.
 MMC ProceedsInc v Lehman Bros Intl (Europe)
Onlya personwithlegal interestcanbe a bailor.
4. Trust and Power
The 2 importance characteristic featuresof power distinguishing from trust are (1) power are discretionary,
(2) beneficiariesownthe beneficial ownershipinthe relevantproperty.
• Re Gulbenkian’sSettlementTrusts
The result is in [mere power] even if the class of appointees among whom the donees of the power may
appointisclearand ascertainedandtheyare all of full age andsui juris,neverthelesstheycannotcompel the
doneesof the powertoexercise itintheircollective favour. If,however,itisatrust power,those entitledare
entitled(iftheyare all of full age andsui juris) tocompel the trusteestopaythe fundovertothemunlessthe
fundisincome andthe trusteeshave powertoaccumulate forthe future.