Nature of trustees office

11/04/23 Equity & Trust II (Dr. Zuraidah Ali) 1

TRUSTEE


Learning Objectives

Students will be able to know;

i) The concept of trusteeship

ii) Appointment of trustee

iii) Removal of trustee.

iv) Retirement of trustee

v) Number of Trustee

vi) Fiduciary Nature of Trusteeship.


Nature of Trustee’s office

Imperatives Onerous : He must act exclusively in

the interest of the trust Many of these powers and duties are

described in the trust instrument. It also depends upon the ctc in which

trust arises.


Position in Malaysia

Trustee Act 1949. Quaere : Does it includes totally the

application of equity in Malaysia NO Trustee Act only covers some topic. Others will be governed by Equity.


Codified Part Relating to Duties of Trustee

1) Appointment, retirement and removal of trustee (s39 - s45)

2) Powers of trustee a) General power (s16 – s30 & s 68) b) Investment power (s11 – s15) c) Maintenance and Advancement

Power (s36 – s37)


3) Indemnity from liability of trustee and 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)


Uncodified Part Relating to Trustee

a) A standard of care to be exercised by 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


Defences of trustee Personal & Proprietary claim - tracing


WHO CAN APPOINT TRUSTEE.

Court has inherent jurisdiction in actions for the administration of trusts to appoint or remove a trustee compulsorily.

Court will need to look powers contained in the instruments


APPOINTMENT OF TRUSTEE General rule : Any person capable of

holding property in law could be made a trustee and it is for the settlor or testator to decide the basis on which a person is chosen.

The court is under no duty or obligation to determine the reasons for the deceased’s appointment of the defendant as the trustee of her estate

PHUA CHUI HAR V AMANAH RAYA BHD [2002] 4 AMR 4753.


Who May be A Trustee 1) Minor - cannot be appointed as a trustee – can’t

hold a legal estate. An infant may become a resulting or constructive trustee of personalty

(Re Vinogradoff[1935] WN 68 – a child of 4 years was able to hold property on resulting trust.

2) Crown Old position : Crown cannot be trustee Accepted principal of vicarious liability


3) Judicial Trustee -An individual or corporation appointed

by the court under Judicial Trustee Act

Rationale : to provide a middle course in cases where administration of the estate by ordinary trustee had broken down


Section 40 of Trustee Act 1949

Power of appointing new or additional trustees.

(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 twelve

months, or iii) desires to be discharged from all or any of the

trusts 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,


Who may exercise power of appointment

Section 40(1) stated that it may be exercised by the following persons subject to the restrictions imposed by this Act on the number of trustees -

(a) the person or persons nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust; or

(b) if there is no such person, or no such person able and willing to act, then the surviving or continuing trustees or trustee for the time being, or the personal representatives of the last surviving or continuing trustee


Appointment by the court

This can be found under section 45 (1)(a) of the Trustee Act.

(similar with s 41 0f the English Trustee Act 1925)

Statutory formula used by the court: where “it is inexpedient, difficult or impraticable so

to do without the assistance of the court.


Section 45 of Trustee Act 1949

Power of Court to appoint new trustees. (1) (a) The Court may, whenever it is

expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult or impracticable so to do without the assistance of the Court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.


(b) In particular and without prejudice to the generality of the foregoing provision, the Court may make an order appointing a new trustee 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 or

has been dissolved.


(2) An order under this section, and any consequential vesting order or conveyance, shall not operate further or otherwise as a discharge to any former or continuing trustee than an appointment of new trustees under any power for that purpose contained in any instrument would have operated.

(3) Nothing in this section gives power to appoint an executor or administrator


Case

BHIKU Daeng & Ors v Maung Shwe Tun (1980) MLJ 184


How many Trustee

s39. Limitation of the number of trustees.

(1) In the case of settlements and dispositions on trust of property, whether movable or immovable, made or coming into operation on or after the material date -


(a) the number of trustees thereof shall not in any case exceed four, and where more than four persons are named as such trustees, the four first named (who are able and willing to act) shall alone be the trustees, and the other persons named shall not be trustees unless appointed on the occurrence of a vacancy; and


(b) the number of the trustees shall not be increased beyond four.

(2) The restrictions hereby imposed on the number of trustees do not apply in the case of property vested in trustees for charitable, religious, or public purposes.


Public Trust :s 9 of the Government Proceedings Act

If there is any breach of trust created for public, religious, social or charitable purposes or of there is a direction from the court, the AG or two or more persons having interest in the trust, after obtaining the consent in writing from AG, may institute a suit for the purpose of:


a) asserting any interest or right in the trust 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 trust

property or of the interest therein shall be allocated to any particular trust


g) authorising the whole or any part of the trust property to be let, sold, mortgaged, charged or exchanged,

h) settling a scheme and i) obtaining such further or other relief

as the nature of the case may require.


4) Removal of Trustee

Three ways 1) Under an express power in the trust

instrument 2) Statutory power 3) Court’s Inherent jurisdiction.


a) Express Provision

The trust instrument may expressly give power to remove trustees.

Such power must be strictly construed. The donee of such power must strictly

comply with it if he wishes to act on it.


b) Statutory Provision

i) Section 40 (1) If trustee remains out of Malaysia for

more than 12 months or refuses to act or is unfit or incapable to act or is a minor he can be removed and replace by one or more trustee


ii) If the court exercises its powers under section 45 it may be remove a trustee in the course of appointing a new trustee or trustees.


c) Court’s inherent power

The court possesses an inherent jurisdiction to remove trustee in the execution of trusts.

It is rarely used


The Court need to have a clear ground for removal in cases where a trustee is ignoring one of his duties because sometimes in some ctc though it will not constitute breach of trust


Halsbury’s Laws of England (4th ed), vol. 48 para. 783: The court will remove a trustee, including the trustee of a

foreign settlement,where he refuses to execute the trust (Palairet v. Carew [1863] 32 Beav 564;Luke v. South Kensington Hotel Co [1879] 11 Ch D 121) or has mismanaged the trust (Ex Parte Phelps [1742] 9 Mod Rep 357; Ex Parte Reynolds [1800] 5 Ves 707; Peatfield v. Benn [1853] 17 Beav 522) or has disqualified himself by hiscircumstances or conduct from continuing to hold the office (Millard v. Eyre[1793] 2 Ves 94) or may perhaps do so if his continuance in office would be likely to be detrimental to the trust owing to his being out of sympathy with its objects (A-G v. Hardy [1851] 1 Sim NS 338 at p 357) and with the beneficiaries. A trustee will not, however, be removed against his will on account of a pecuniary embarrassment which has ceased to exist and which does not appear to have imperilled the interests of the beneficiaries (Re Bridgman [1860] 8 WR 598).


Letterstedt (now VicomtesseMontmort) v. Broers & Anor [1884] 9 AC 371:at p 389 per Lord Blackburn ‘Friction or hostility between trustees

and the immediate possessor or the trust estate is not of itself a reason for the removal of the trustees’


Yusof bin Ahmad & Ors v. Hongkong Bank (Singapore) Ltd & Ors [1990] 2MLJ 326

Chan Sek Keong J (as he then was) held that a trustee who failed to comply with the directions of the testator may be removed by the court even if no harm has been done to the beneficiaries or to the trust.


Arumugam Ponusamy v.Karupiah Ramasamy & Ors [2005] 4 CLJ 805

The discretion vested in the High Court to direct the removal of a trustee.

The trust in the present case is an express trust.


5) Retirement of Trustee

Retirement means a discharge from further responsibility and liability under the trust .

A trustee should not retire when faced with disputes among beneficiaries and leave them to settle their differences among themselves


Three ways 1) Under an express power in the trust

instrument 2) Statutory power 3) Under an Order of Court


a) Express Provision

The trust provision may expressly provides for the retirement of trustees.


b) Statutory Provision

i) Section 40(1) enables a trustee to retire (desire to be discharged) if he is being replaced by another trustee or trustees.


ii) Section 43 (1) : allows the retirement of a trustee without new appointment subject to following conditions :

A) a min of 2 trustee or a trust corporation will remain after his retirement

B) his co-trustee and such person empowered to appoint new trustees consent to his retirement

C) his declaration to retire must be in writing


iii) Court Order The Court may order a trustee to retire

under section 45 when it is appointing a new trustee or new trustee (in substitution for)

The court also possesses power under its inherent jurisdiction to allow a trustee to retire.


6) Death

Trusteeship automatically terminates on death.

Section 23 (1) : where a trust is imposed on 2 or more trustees : the same may be performed by their survivors ; for the time being.


If there is a sole trustee or last surviving trustee : the trust estate devolves on his personal representatives.


FIDUCIARY NATURE OF TRUSTEESHIP

1) Remuneration Fundamental principle : cannot expect

remuneration except; Provided by the trust instrument Authorised by the court Authorised by legislation S 46


2) Secret Profits- not suppose to secure benefit for himself by taking advantage of the trust

Not to take remuneration as trustee-director

Not to purchase trust property/beneficial interest

Not to compete with trust Not allowed to receive bribe.

Date post:	08-May-2015
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